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NASDAQ Dozen – How to easily research stocks?

Just In: NASDAQ tells investors the best ways to research stocks before buying

NASDAQ, which stands for “National Association of Securities Dealers Automated Quotations,” is the #1 screen-based electronic stock exchange in the US and the second largest in the world in terms of market capitalization. NASDAQ collected more trading volumes than any other stock exchange anywhere. So when the NASDAQ issues guidance or gives advice, you should know it.

Recently, NASDAQ has published a report, where they have recommended how investors should carry out detailed research before buying a stock. NASDAQ recommends 12 steps to take a deep dive into a stock, calling it the NASDAQ Dozen.

What is the NASDAQ Dozen?

NASDAQ Dozen is the 12 steps to research any stock. These steps are,

1. Income

2. EPS or earnings per share

3. ROE or Return on Equity

4. Recommendations

5. Surprises in earnings

6. Expected growth

7. Earnings growth

8. The PEG relationship

9. Industry earnings

10. Days to cover

11. Operations carried out by people with privileged information of the company or use of privileged information

12. Measurement of the rise or fall of the shares, or the weighted Alpha

Here is a detailed NASDAQ Dozen explanation for analyzing a stock.

Income – This one is quite simple and refers to the income earned by the company.

EPS – EPS or earnings per share is a mathematical calculation arrived at by dividing the company’s earnings by the total number of shares. The EPS of a good stock is always high, but also check if the EPS is increasing or not.

ROE – The total profit or loss after taxes and interest, and divided by the owners’ equity. NASDAQ recommends stocks where ROE has been rising for at least the last two years.

Recommendations – What do the experts say about this value? Since they are investigating all the time, it makes sense to find out.

Earnings surprises: Results are announced every quarter and analysts will always forecast earnings or EPS for the next quarter. Now, if you find that the actual EPS is more than what was predicted, then you can conclude that this is a good stock to buy.

Forecasted Growth – While it’s important to know past earnings, you should also know what the experts are saying about future growth prospects.

Earnings Growth – This is a projection of expected earnings growth over the next 5 years based on stock analysts.

PEG Ratio: The ratio is obtained by calculating the stock price, EPS, and expected growth of the company. NASDAQ is asking investors to pick stocks where the ratio is less than 1.

Industry Earnings: The earnings of the company should be compared with those of other companies in the industry to get the overall picture. If you find that the company is doing better than the industry average performance, then you should go ahead and pick it up.

Days to cover: How many days will short sellers take to cover their positions? Of course, this should be based on the trading volumes of the shares.

Insider Trading: An analysis of whether or not members of the company are buying the shares. If the managers are confident, they will buy the shares themselves.

Alpha Weighted: This is an assessment of the stock’s rise or fall over time.

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