How to Use Automated Tools to Study Stock Pricing
Several online tools can help online investors through the process of analyzing a stock’s valuation. The following list highlights sites that are excellent places to start to get you thinking about what goes into evaluating a company’s stock price and see whether it might fit in your portfolio:
Quicken’s Stock Evaluator: You need a member ID and password to access this corner of the Quicken site, but after you get them, the Stock Evaluator tool takes you step by step through a five-part analysis of any stock. Just enter the stock in the Quote field and click the Go button. Next, click the Evaluator option in the heading just above the stock’s name. Stock Evaluator analyzes stocks’ growth trends, financial health, management performance, valuation, and intrinsic value.
Value Point Analysis Model: Developed by the folks at the Value Point Analysis Financial Forum, the Value Point Analysis Model asks you to enter basic company information about a stock. A few of the things you must enter include the company’s number of shares outstanding, long-term debt, current dividend, projected earnings, and current stock price. After you get all that stuff entered, click the Execute button, and the Web site tells you what it thinks the stock is worth.
BetterInvesting: BetterInvesting provides a Stock Selection Guide to its members that helps evaluate a company’s valuation to determine whether the stock is a buy, hold, or sell. The Stock Selection Guide compares the company’s expected P/E ratio with its P/E ratios in the past. The Stock Selection Guide is available as a paper form you must meticulously fill out, but is also found in different software programs you can buy from BetterInvesting, which pull down company data automatically.
InvestorGuide: Enter a stock symbol in the Enter a Ticker or Company field, click the Go button, and then click the Analysis tab on the new page that appears. You end up on a page that offers a detailed commentary on your chosen stock, including readings of the stock’s valuation, recent announcements made by the company, and other industry trends. InvestorGuide offers commentary on stocks if you click the Analysis tab after entering the stock symbol at the upper-left corner.
Wikinvest: Wikinvest tries to bring to investing the same concept of open collaboration that Wikipedia brought to the encyclopedia. Click the Search the Wiki link in the upper-right corner of the screen to get started. Enter a company name or stock symbol into the search box and click the search button. You are taken to an analysis screen, which breaks down the company’s trends, leadership, and competition.
SmartMoney’s Price Check Calculator: SmartMoney gives it to you short and sweet. Enter a stock symbol into the Ticker field and click Enter, and the Web site crunches the numbers and gives its opinion on what the stock is worth.
Several problems exist with using valuation ratios alone to pick stocks, including the following:
Cheap stocks might be cheap for a reason.
You get what you pay for.
Dividends aren’t a contract.