Stock market investment is one of great ways for an investor to earn money fast. You can easily open your share trading account & Demat account with some reputed & professional stock broker to start investing in stocks.
Stock investment is not an easy investment as it may appear to you in the first sight. It requires a lot of research for the selection of right stocks at right time to gain handsome returns.
You can predict fundamentally strong stocks by getting stock market tips from your stockbrokers or from your favorite stock analysts.
You can also easily analyze money making stocks through important financial statements like income statement, balance sheet, and cash flow statement. Here are 16 key financial indicators to make money quickly in stock markets:
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(1) Price-To-Earning (P/E) Ratio
It is one of the best & most common indicators to make money quickly in stock markets. Price-to-earning (P/E) ratio is one of the simplest financial ratios to select cheapest stocks to earn money fast in stock markets. P/E ratio tells us about relationship between earning of a company & its stock price.
It can be calculated by just dividing the current stock price per share by earnings per share. A stock should trade for a P/E equivalent to 8.5 times of earnings plus two times the growth rate of earnings.
For example, stock price of a company trading at $50 with EPS of $5 will have a P/E ratio of 10.
P/E Ratio = current stock price / earning per share (EPS) = $50 / $5 = 10
P/E ratio is found to have limited application in finding cheap stocks. Some industries like homebuilders & commodity producers are found to trade at low P/E ratio as investors don’t want to pay more for their stock due to possibility of decline in earnings too fast.
However, some rapidly expanding industries are found to trade at high P/E ratio as investors are willing to pay more on the hope of increased profits in future.
A lower P/E ratio is often considered to be best strategy to pick undervalued stock. But, sometimes a stock trading at high P/E ratio today may offer higher rate of returns & a better P/E ratio in future. You need to look other indicators too to spot a possible bargain.
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