Good Company Seal
So, what factors should be considered when evaluating a company?
A good credit score, is a place to start. Although this does not always show the full picture it can highlight any major issues from the off. Let's say a company was looking to get a loan as they needed to buy large quantities of stainless steel fittings from a reputable company. With a bad credit rating this can be very difficult to obtain. While not always a definite no the whole process can take much longer and cause extra expense. For these reasons alone it is important to look after your credit rating.
If you are looking to buy in lots of stock then it is important to look at your PE ratios. This means really digging into Price to earnings and as you would expect a lower PE ration is much more desirable than a high one. Most of it is just common sense, but sometimes it's only when you see things written in black and white that the message really hits home.
You want to go for a high PE of course. so you're looking for stock trading at well above its earnings. A word of caution here though as too much too soon can be a downfall and pitfalls that were not originally seen can become apparent very quickly. There are many that fall into this trap. If it was that easy we'd all be doing it and making millions. You need to evaluate all the different scenarios and aspects of the stock before making that final decision.
If you decide to go for Lower PE then it can sometimes be a safer investment but rapid growth is not usually the outcome here so you're looking at a long term investment rather than a quick win. What your really looking for is the low hanging fruit, but not the bad fruit.
Other aspects of a good company are financial stability, this really goes without saying but if it's not good then they are not worth the investment. It's worth looking at a company's long term business plan before giving them the seal of approval. By this logic looking at their short term goals as well as long term goals would be advisable.