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Signal 1: Rise in Earnings If a company earned $1 per share for the past three years and its earnings are now $1.20 per share (a 20 percent increase), consider this increase a positive harbinger. As the saying goes, "Earnings drive the market," so you need to pay attention to the company's profitability. The more a company makes, the greater the chance that its stock price will increase.
Signal 2: Increase in Assets as Debts Are Stable or Decreasing Increasing assets while decreasing debts (or at least stabilizing them) is key to growing the book value of a company. Rising book value has a positive impact on market value, which, in turn, tends to drive the stock price up as well. Therefore, it pays to watch book value.
Signal 3: Positive Publicity for Industry When the media report that a company is doing well financially or that its products and services are being well received by both the media and the market, that news lets you know that this company's stock may be going places.
Signal 4: Heavy Insider or Corporate Buying Company insiders (such as the CEO and the treasurer) know better than anyone else about the health of a company. If insiders are buying stock by the boatload, then these purchases are certainly a positive sign for investors.
Signal 5: Rumors of Takeover Bids A company that's rumored to be a takeover candidate (a company that may be potentially bought out by another company) may have an attractive aspect, such as a promising new patent or exclusive rights to certain properties, that could make it worthy for investors as well.
Signal 6: Praise from Consumer Groups A company is only as good as the profit it generates. The profit it generates is only as good as the revenues that the company generates. The revenues are based on whether customers are accepting (and shelling out money for) the company's products or services. Therefore, if what the company offers is popular with consumers, it bodes well for profits and consequently higher stock prices.
Signal 7: Strong or Improving Bond Rating The creditworthiness of a company is a critical factor in determining the company's strength. Because the bond rating is assigned according to the company's ability to pay back the bond plus interest, it stands to reason that a strong bond rating indicates that the company is financially strong.
Signal 8: Powerful Demographics If you know that a company generates lots of profit from the teenage market and you find out that the teenage market is going to expand by 10 percent per year for the foreseeable future, what would you do? Exactly — you'd buy the stock of that company.
Sign 9: Low P/E Relative to Industry or Market If the industry's P/E ratio is 20 and you're looking at a stock that has a P/E of 15, all things being equal, that's great. The company has room for growth, and you have a good value.
Source of Reference : Paul Mladjenovic , Stock Investing for Dummies , Willey Publishing