Financial Planning for Regular Folks
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Researching a Company Before Buying Stock Checklist



It is important to know where the money you invest goes. Failing to research a company before buying shares could lead to a loss or result in an investment that doesn’t reflect your current goals or values.

Checklist: Researching a Company Before Buying Stock

This checklist will guide you through your research:

Researching a Company Before Buying Stock Checklist
Find out what the company does, where it is located, and how it operates. The official website of the company is a good place to start your research but you shouldn’t hesitate to call and ask a few questions.

Learn more about the company’s background. Find out when it was launched, ask about previous activities or products, acquisitions, mergers and any recent changes in the board of directors.

Does the company have a good reputation? Look at online reviews, complaints filed with the BBB, and even social media to get a better idea of what customers, clients, and employees are saying about the company.

Look for news stories involving the company, its CEO, or owners. You might find that the company was recently involved in a scandal or an ecological disaster.

Take a look at the financial reports the company makes available to its shareholders. This will give you an idea of whether or not the company is profitable. You’ll also find out more about the different areas where the company invests.

Peruse the company’s balance sheet. Financial reports will show you how much the company is earning and investing, but balance sheets will show you how much the company borrowed.

Read the 10-K and 10-Q reports. These reports should contain information about the company’s history, structure, earnings, financial statements, and information about compensation for its CEO or owners. These reports have to be filed with the SEC and should contain a lot more information than the financial reports sent to shareholders.

Who are the main competitors of this company? Ideally, the company should have a solid strategy to beat them or at least keep up with them.

What kind of outlook is there for the future? Do you feel that current practices are sustainable and that the company will be able to remain competitive in the future?

Look for any red flags. Frequent changes on the board of directors, inconsistent accounting methods, discrepancies between the official reports shared with investors and the 10-K or 10-Q reports, a large number of bad reviews, or bad press should raise concerns.


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