What are the best parameters for stock analysis?

To analyse a stock, don’t make it complicated. Just focus on a few important things.

First, understand the business.
Ask yourself what the company does and if people really need it. If you cannot explain the business in simple words, it is better not to invest.

Let me Explain this better with a simple Story…
Imagine Mama Ngozi sells tomatoes in the village, and If people in the village always need tomatoes to cook, then her business is useful and will likely continue to grow. But if nobody really needs what she is selling, then the business will struggle. This is how you should think about a company too.

Second, check profit.
A good company should be making profit consistently. Look at whether the money coming in is more than what is going out. If the profit is growing over time, it shows the business is doing well.
For Mama Ngozi, if she sells many baskets of tomatoes every day and still has money left after expenses, it means her business is healthy.

Third, check debt.
Too much debt can be dangerous. A strong company should not depend heavily on borrowing to survive.
If Mama Ngozi borrows too much money to run her tomato business and cannot repay easily, it may become a problem.

Fourth, look at the price.
Do not buy a stock just because people are talking about it. Ask yourself if the price is fair compared to the value of the business. It is like buying Mama Ngozi’s tomatoes. If the price is too high compared to other sellers, you may wait or buy less.

Fifth, consider the management.
Who is running the company and can they be trusted to make good decisions. A good leader can grow a business while a poor one can cause losses.

To get information, you can check company annual reports on their website, stockbroker apps, financial news websites, and the Nigerian Exchange website.

A good stock comes from a good business, steady profit, manageable debt, and a fair price. If you do not understand it, do not invest in it.