How to Determine If a Company Still Has Value
- 1). Research the industry. A company in a useful, service-oriented or cutting edge-technology field will be more valuable than a company that offers dated products and services.
- 2). Compare the company you're researching to other companies in the field. Find out how its value in the stock market compares to other companies of comparable size in the same field. Ask a broker how the company compares to other comparable companies. You can find a broker by calling local investment firms and asking to set up a consultation with one of their stockbrokers. Read news reports and predictions set forth by business analysts in any major newspaper. People with extensive business knowledge are more easily able to determine the worth of a company.
- 3). Read company literature at the corporate website. Look at the general tone of letters to shareholders and employees. Determine whether they're apologetic or positive and forward-thinking. Companies that are doing well want to share that energy with people involved in the company. Companies doing poorly have to express that to their shareholders and will often promise to turn things around. If you see that trend in the company literature, it may be poorly managed.
- 4). Graph their quarterly profits for the past 5 years. You should be able to find this on the website. Once you've graphed the profits, look and see whether they're trending up or down. If they're trending down, the company still could be valuable. If they're expanding, diversifying or putting the profits back into the business, it could explain a down-trend in profits. If there's no evidence of growth and profits are declining, it's likely the company would not be a valuable investment.
- 5). Pay attention to business news. Reporters and analysts will discuss the success and failures of various companies. Listen closely and determine why the companies they mention succeed or fail. If you see the business you're researching make similar steps, then you know it is likely no longer valuable.
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