BasicsFundamental analysisStock investments

Stock Health Check-Up (Is The Stock Healthy To Invest?)

Written by Vanshika Kothari
Mon Apr 26 2021
Analyzing Stocks
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Analyzing Stocks

“The stock market is filled with individuals who know the price of everything, but the value of nothing.” ― Phillip Fisher.

Investors need to judge the stocks on various parameters before they invest in them. A proper understanding of the company and its performance is essential before investing, which can be done by a Stock Health Checkup. Buffett advises investors to not think of their investments as “stocks” but to think of buying a stock as purchasing an entire business. Hence, before investing, investors should take a thorough look at the company’s health and evaluate the industry with the help of various metrics.

The stock price is majorly driven by the company’s future prospects and growth. It is imperative to check for the company’s fundamentals. The Financial Statements reveal a lot about the company’s business and health. Financial statements offer a window into the health of a company, which can be challenging to gauge using other means. To accurately assess a company’s financial health and long-term sustainability, investors must consider several financial metrics in tandem. 

Key Areas To Look For

Quite often, evaluating the financial statements can be strenuous and cumbersome, involving numerous pages containing facts and figures. So, which are the right areas to look for and the correct metrics to assess?

  • Basic and Diluted EPS

Basic and Diluted EPS analysis helps investors gauge the income that the company can generate per outstanding share. Basic EPS gives information about how much a company’s net income was allotted to a share of common stock. Diluted EPS is used to measure  a company’s earnings per share (EPS) if all outstanding convertible securities such as convertible preferred shares, convertible debentures, stock options, and warrants. were exercised.  

  • Peer P/E and Peer EPS Analysis

The P/E (Price to Earnings) ratio is equal to the market price of the company divided by its EPS. The investor gets an idea about the company’s valuation concerning its peers chosen in the list. The higher the P/E means the company has been overbought, and investors can compare it with the average P/E ratio of the peers. Investors can also analyze the company’s EPS with the average of its peers to get an idea about the relative earning capability of the firm.

  • Relative Growth analysis

It is always good to invest in companies with better operational efficiency. The profitability ratios like Gross margin, EBITDA margin, and Profit Margin give this idea to the investors.

Gross margin is the ratio of Gross profits (Revenues – Operational Expenses) to Total revenue. It tells investors how much margin the company gains over its operational expenses.

The EBITDA margin is similar to the Gross margin, but instead of only operational expenses, it includes the other fixed costs as well and excludes only Depreciation & Amortization, Interest, and Tax expenses.

Net profit margin includes all expenses in the calculation and gives the idea of the company’s overall profitability.

Check the Stock Health Using Excel (MarketXLS Template)

Stock Health Check-Up

Find this template here

With the help of MarketXLS, investors can evaluate the Stock’s Health without any hassle. By entering the Stock Ticker and the year, investors can get the metrics for assessing the stock’s health. The tedious work of data collection and processing gets simplified with the help of this template. It also provides interactive graphs, which makes the interpretation much easier and more perceivable. 

EPS Analysis

Stock Health Checkup

Breaking Down The Template Into Segments:

  • EPS Analysis:

This segment will highlight the EPS values of stock over the past five years. Both the Basic and Diluted EPS are calculated and displayed.

  • Industry PE & Peer EPS Analysis:

The second segment requires users to enter the Sector peers as per their discretion. The template will calculate the EPS (basic and diluted) and P/E ratio for the specified year. Users can compare these values with peers and the average of all as well.

  • Relative Growth Analysis

The template will calculate the CAGR growth rates in EPS, Revenue, and Net Income (Profit) over the last five years in this segment.

  • Profitability Analysis

The template will calculate the Gross Margin, EBITDA Margin & Net Income Margin for the company and its peers in the industry for users to compare the firm’s profitability.Graphical Analysis



Lastly, all the different segments of the template are put into various charts and graphs that provide an interactive visual dashboard for the user to get all the information at a glance.

The Bottom Line

Before investing, just knowing the price will not be enough for investors; as Phisher rightly pointed out, the knowledge value of the company is a must.

Selecting the right company to invest in can be a strenuous task. Analyzing companies and their performance using their financial statements takes a lot of time and effort, but with the help of MarketXLS, you can do that comfortably and hassle-free. You can get all the historical data (EOD, Intraday) you may need with MarketXLS functions in a few clicks.

None of the content published on constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The author is not offering any professional advice of any kind. The reader should consult a professional financial advisor to determine their suitability for any strategies discussed herein. The article is written to help users collect the required information from various sources deemed authority in their content. The trademarks, if any, are the property of their owners, and no representations are made.

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