8-Step System for Researching Stocks Like a Pro

As an experienced financial and crypto news writer, I've analyzed hundreds of stocks in seven years to identify potential investments. My research process involves eight steps that help me evaluate a company's worth.

I start by building context about the company, comparing its total returns to the S&P 500 over various periods. Ideally, the company should have outperformed the index over the last five years, like Costco Wholesale and Apple.

Next, I skim through the latest financial reports to examine key figures such as cash on hand relative to annual expenses, debt, and gross and net profit margins. Revenue growth and free cash flow growth are particularly important in this step.

I then map out the company's business model, growth drivers, upcoming catalysts, and addressable market size. This is where nuances start to emerge, requiring further digging.

For instance, Costco's narrow gross profit margin of 11% in Q3 may seem concerning, but its membership fees contribute significantly to its operating income, insulating it from sales headwinds.