How to Read Stock Market Reports | Expert Advice for New Investors

November 25, 2021 | Editorial Team

Are you ready to venture into the stock market? The stock market is a considerable risk investment; hence you must know the basics to make the right decisions confidently. The most crucial step you must do as a beginner is to learn how to read stock market reports as analysts do. 

Stock market reports help investors critically evaluate a company’s /industry’s past and current data and use gathered data to make crucial decisions. Therefore, knowing how to read market reports like an expert is a vital skill you as an investor should have to decide on which trading strategy to pursue. Remember, with the right strategy, you can even take advantage of a stock market crisis and profit more than you expected.

So, how do you read a stock market report? Read through the article and learn more.

How Do You Analyze a Stock Report?

As an investor, the best thing you can do is become self-reliant by learning how to read stock market reports. It’s also essential to learn analysis tricks as most analysts are unreliable, and their credibility is at times questionable. Proper stock market analysis can help you make an informed decision considering the many stocks you can invest in and make a good return. 

The stock analysis also assists in comparing stocks against each other and building a solid and diversified portfolio. Considering no investing tools can guarantee accuracy on which stocks are best, you are your best shot at analyzing the market. When buying or selling, here are a few analysis methods that give a better understanding of companies and stocks. 

Fundamental Analysis

The concept behind fundamental analysis is that a stock price does not always reflect the actual intrinsic value of the underlying firm. To establish if a stock is attractively valued, fundamental analysts utilize valuation indicators and other data. Fundamental analysis will apply if you are a long-term investor seeking high returns.

Market share, financial statements, economic statistics, and assets are the data sources applied during fundamental research. Investors often study the metrics on a business’s financial records. They focus on the balance sheet, cash flow statement, footnotes, and income statement– to do fundamental analysis.

Stock analysis on a company’s financial statements helps check for measures of a company’s growth trajectory, liquidity, profitability, efficiency, solvency, and leverage when performing. Different ratios assess a company’s health. The current ratio and quick ratio, for example, are used to determine whether a corporation can pay its short-term liabilities with its existing assets.

Technical Analysis

Technical analysis generally assumes that the price of a stock reflects all relevant information and that prices follow trends. In other words, you might be able to forecast future price behaviour by looking at a stock’s price history

Technical analysts look at the entire financial market, focusing on price and volume and the demand and supply changes that affect the market. Stock charts are essential for technical analysis since they display stock trends over time through a graphical representation.

Qualitative Analysis

During stock analysis, it’s also crucial to assess whether the company behind the stock is worth your investment (learn more about companies’ net worth). And if you don’t have the time or enough knowledge to conduct your own research, you can seek advice from a robo advisor. Here are some of the things qualitative research helps investors analyze

  • Competitive advantage. The analysis helps investors determine if the company has a durable competitive edge to sustain its market share. Aspects such as a trusted brand, extensive distribution network are some of the competitive advantages investors analyze. 
  • Strong leadership. We have seen even great and established companies fall due to bad leadership. So, the top management credentials tell a lot when it comes to making crucial company decisions. 

What Do the Numbers Mean on a Stock Market Report?

When analyzing stock reports, the quote data can intimidate and discourage one from pursuing their investment dream. But what does each of these stock quotes represent? 

Opening Price

The opening price is when a trade happens for the first time during the trading day. This statistic is frequently used in conjunction with the current price or the previous trading session’s closing price to quantify the stock’s movement.

Last Price

The last price or the previous day’s close data represents the price at which a buyer or seller executed the previous trade. Once a trading session has ended – see day trading in Canada – the latest traded price constructs various charting types, such as the line chart.

Bid and Ask

A bid is the highest price that a major brokerage firm has stated it is willing to pay for a share of a specific stock at a specified moment. The ask is the lowest price at which a company has displayed it is ready to sell its stock (see more on becoming a stockholder).

a graph on the monitor screen

Trading Volumes

The volume of stock refers to the total number of shares exchanged in a single day. 

52 Week High/Low

The number represents the highest price the stock has traded at over the last 52 weeks. On the other hand, 52 weeks low displays the lowest price traded over the weeks. 

Market Cap

Market capitalization measures a company’s outstanding shares based on the number of shares it has on the stock market multiplied by its current share price.

Dividend Yield

Dividend yields are the percentage of the current share price how much dividends a company is willing to pay its investors. 

How Do You Analyze Stocks for Beginners?

As a beginner, analyzing stocks can be overwhelming (see also how often to check stocks). Here is a simplified guide.

  • Start by reviewing a company’s financial statements

A Form 10-K provides vital financial information such as the company’s balance sheets, income, expenditures, revenues, and assets. On the other hand, form 10-Q shows financial results and operations. 

  • Narrow your focus

Financial statements contain a lot of information; therefore, there is a need to narrow it down to the most valuable data. Focus on net income, revenue, earnings per share, and price earning ratio.

  • Focus on qualitative research

Qualitative research focuses on the operations and prospects of a company. Ask yourself; how does the company make money? Do they have a competitive advantage? How efficient is the top management? And what changes can affect the company’s growth? 

  • Apply your research into context

The mentioned steps may show the financial health of a company. However, it is vital to put the research context in place. You need to look at the company’s past performance and how it faired during challenges. Also, compare the company data to that of other companies in the industry. 

How to Read Stocks: Charts, Basics, and What to Look For

There are tons of information to analyze. The best starting point is to read stock charts to build a portfolio. 

What Is a Stock Chart?

 A stock chart is a graph that shows trading activity over a certain period, for example, five years. Advanced stock charts provide more data, and by grasping the fundamentals, an investor can draw a wealth of information about a stock’s past, present, and future performance.

 What Are the Basics of Reading a Stock Chart?

Learning how to read a chart makes all the difference in stock investment as it helps make accurate predictions. To fully benefit from a stock chart, here are four basics you should know. 

  • Identify a trend line.

A trend line is a blue line that either goes up or down. A trend line comes in three types; line chart, bar charts, and Candlestick charts depending on your preferred chart. Line charts use the last price of a specific stock to track the price movements.

 On the other hand, bar charts follow a trend using the stock’s closing price and the highest and lowest prices for the day. Candlestick charts use green or clear boxes to show stock prices closed at the highest and lowest.

  • Identify lines of support and resistance.

Support and resistance are the levels at which the stock has remained for a certain amount of time. A line of support is a price below which stock trades are unlikely to fall, while a line of resistance is above which it is unlikely to rise. Lines of support and resistance help investors determine when to buy and sell.

  • Know when dividends and stock splits occur

When a company decides to give a share of its profits back to tie investors, it does so in dividends. On the other hand, the board of directors can issue more shares to the public by performing stock splits. Although the value of the company may not change in both instances, the share price might change. 

  • Understand trading volume.

Many small vertical lines appear towards the bottom of the chart. The lines show a trend in the number of times the stock traded that day or the previous day. It is vital to monitor volumes as they help monitor volume spikes. When volume increases, the price of a stock can swiftly fluctuate.

  • Identify a ticker symbol.

A ticker symbol is a symbol used to describe a particular stock in a stock exchange. For instance, SNAP is a ticker used by Snapchat in the New York stock exchange.

The Bottom Line

After learning how to read and analyze market reports, you can now confidently face the stock market. 

You must understand the critical data points in stock such as high, low, open, close, ask, and bid to analyze the trend and share pricing carefully. The information is vital when making informed decisions. It is also essential you learn how to read charts as they come in handy when tracking changes in market trends.