20 Tricky Ways To Identify And Avoid Value Traps in Stocks

Tricky Ways To Identify and Avoid Value Traps in Stocks Stock trader shocked & confused after finding value traps in stocks.

(10) Cash Flow From Operations

It is one of the most popular & tricky ways to identify and avoid value traps in stocks. You can’t detect a multibagger stock by just looking toward earnings of a company.

It is because it can be manipulated quickly through various accounting tricks. But, cash flow can’t be manipulated. You need to make sure that company is showing stable or increasing cash flow from operational activities.

A stock at cheaper valuation along with negative cash flow is not an investment pick. It is purely a possibility of a value trap.

[Read Also: 10 Signals Indicating Stock Price About To Surge Heavily]

(11) Non-Sustainable Competitive Advantage

It is one of the best & tricky ways to identify and avoid value traps in stocks. A cheaper stock can rebound to become a multibagger stock. It is possible only if company has some sustainable competitive advantages over its peers.

You need to stick to companies that have presence of new designs, market share, latest technology, as well as new products & services.

A company without sustainable & long term competitive advantages can only create value traps rather then value investment.

Image Source

Recommended Posts

About Editing Staff
At GetUpWise, we are a team of professional writers from different areas of subjects. We are conducting thorough research on each & every topic from highly reputed sources before writing any piece of article. Once research is done, we try our best efforts to provide informative piece of articles in an easy to understand manner. It is something that is extremely essential to meet our goal while reaching & offcourse building a strong online community. We do update our articles from time to time in order to provide the most latest information quickly. Thus, our articles can be used as a "way to gain smartness".

Leave a comment

Your email address will not be published.



This site uses Akismet to reduce spam. Learn how your comment data is processed.

Get Instant Access To GetUpWise Posts

Subscribe Us

Please do verify your email address by clicking a link sent to your email.

More in Stocks & Mutual Funds
Indicators To Make Money Quickly In Stock Markets.
16 Key Indicators To Make Money Quickly In Stock Markets

(7) Return On Equity (ROE) It is one of the important financial indicators to make money quickly in stock markets....