Find good stocks, step by step

1. Find a company to study

Use the search field if you already have a company in mind. Otherwise, open the Screener from the side menu. A screener is a list of stocks that you can narrow down using filters.

Start with businesses you can understand. Choose a few candidates and open their stock pages. Check the company name, stock exchange and currency so you know which share you are looking at.

Before moving on: write down why this company caught your attention. Was it a strong business, an improving result or a price that looks low?

2. Understand how it makes money

Read the company description. Explain in your own words what it sells, who pays for it and why customers choose it. Then check the company's own reports for the details that matter to your decision.

For example, a software company may receive regular subscription payments. A building company may depend on winning new projects. Those businesses can react differently when customers spend less.

Findx summaries can help you get started, but they can contain errors. Use the original company reports to check important claims.

Before moving on: name one thing that could make the company earn less money. If you cannot explain the business, set it aside while you learn more.

3. Check the business from three angles

Read the scores together, then open their details to see what drives them:

• Quality: how well does the company turn its resources into profits and cash?
• Business Momentum: are the company's recent business results improving or weakening?
• Strength: how well do its finances appear able to cope with difficult times?

A strong business can still be weakening. An improving business can still have too much debt. Check the individual results, any missing figures and the dates behind them. Different types of company use different checks.

Before moving on: identify the strongest result and the biggest concern. Read the score explanations if you need help understanding a check.

4. Look beyond the latest year

Switch between shorter and longer chart periods, such as 3, 5 and 10 years where available. Compare the company's sales, profits and cash over time. One unusually good year can give a misleading impression.

Look at difficult periods too. If the history reaches back to 2008-2009 or 2020, examine what happened to both the business and its share price. Did profits fall? How long did recovery take? A past recovery does not guarantee the next one.

You can also select two dates on the chart to measure the change in the share price. Try different starting dates to see how much the price paid affected the result. The measurement describes the past. It does not predict your return, meaning how much you will gain or lose.

Before moving on: decide whether the latest results fit the longer story. If only a short history is available, treat that as a gap in your research.

5. Compare the price with your estimate of value

A good company can still be expensive. Findx shows the share price beside Fair Value, an estimate of what a share may be worth under the selected assumptions.

Open the Fair Value settings and review the valuation basis. This is the method used to estimate value. Choose assumptions you can explain using the company's history, its outlook or your own research.

Compare with past market pricing as well: what have investors previously paid relative to the company's profits? That gives another perspective, but a past price can also have been too high.

Before moving on: explain why your chosen assumptions are reasonable. The Fair Value guide and valuation bases guide explain the available choices.

6. Try a less favourable outcome

Separate reported results from forecasts. Reported results describe what has already happened. Forecasts are estimates of what may happen, and they can be wrong.

Use the available Fair Value settings to try less optimistic assumptions. For example, try slower growth or a lower price for each dollar of profit. Compare the resulting estimate with today's share price again.

In the example above, a lower estimate of $70 would put the $80 share price $10 above fair value. The apparent opportunity depends on the assumptions.

If Findx cannot calculate a result, read the explanation and investigate the missing information. Do not treat an unavailable figure as a positive result.

Before moving on: describe what could go wrong and whether the price still looks reasonable if the future is less favourable than you first expected.

7. Write down your conclusion

Keep a short note with four answers:

• Why might this be a good business to own?
• Why does the current price look reasonable, or too high?
• What is the main risk or unanswered question?
• What new information would change your view?

Decide whether to research further, follow the company on a watchlist or set it aside. A watchlist is simply a saved list of stocks you want to follow. You do not need to buy a stock just because you have finished studying it.

Revisit your notes when new results arrive or the price changes. Use the same steps again, so you can see whether your original reasons still hold.

Introduction to Findx · Score explanations · Fair Value explained