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To understand the stock market, it’s important that you can read and analyze stocks. There are a number of ways to do this. Some people are more comfortable doing all of their own research and analyzing stocks independently. Others might like to have the help from a stock advisor. So which way is the best way? Benzinga has put together this guide to help you understand all of your options.
5 Ways to Analyze a Stock
Take a look at the number of ways to analyze a stock and familiarize yourself with these terms.
A P/E ratio is short for a price-to-earnings ratio. This is a commonly used method to analyze stocks. You can determine the P/E ratio of a stock by using a simple math division. To find a stock’s P/E ratio, you divide its market value per share by its earnings per share. You’ll use this ratio to help you determine how valuable the stock is. Once you know the stock’s P/E, you can compare it to the stock’s competitors. Typically, the lower a price-to-earning ratio is, the more valuable the stock is.
Earnings per share:
You can also analyze a stock by looking at its earnings per share. You may also see this referred to as a stock’s EPS. This will give you an idea of how much the company is earning and whether investors are benefiting from that. If a company’s EPS is growing, that can be a good sign. Most investors will become interested in purchasing stock in a company when it is earning good money. Generally speaking, the higher a company’s earnings per share is, the more those shares are worth.
The PEG value stands for the price-to-earnings growth ratio. This ratio is similar to the P/E ratio because it also compares a stock’s market value to its earnings per share. The PEG adds another factor by considering the company’s growth. To calculate a stock’s PEG value, you’ll need to know the P/E ratio and the 12-month growth rate of the company. Using the company’s growth rate over the past years, you can estimate the company’s growth rate in the future. In most cases, look for a stock that has a PEG value lower than 1.
Another way to analyze stocks is using information to find undervalued companies that have experienced a lot of growth. To find these companies, you will want to use a price-to-book ratio. This may also be referred to as a P/B ratio. Before you calculate the P/B ratio, you will need to know the company’s book value of equity.
You can find this by subtracting the book value of a company’s assets by its book value of liabilities. Once you know this, you can calculate the price-to-book ratio. To find this ratio, divide the market price of a company’s stock by the book value of equity.
This is another ratio that can help you determine and rank the value of a stock. EBITDA stands for earnings before interest, tax, depreciation and amortization. It is used to evaluate the performance and value of a company. The debt-to-EBITDA ratio is used to measure the ability for a company to pay off its debt. If your calculation shows a high debt to EBITDA ratio, it may mean that the company is carrying too much debt and could be in trouble.
Best Places to Get Stock Recommendations
Instead of going through the ratios yourself to figure out which stocks to invest in, you might decide to seek out recommendations. There are a number of reputable sources online that can help give you an overview of the stock market. These sources can recommend valuable stocks to invest in and help you understand the stock market better overall.
Stock terminals are computer systems that allow you to access real-time financial data. Many people refer to the Bloomberg terminal when talking about stock terminals. The Bloomberg terminal has been around since the 1980s and it has built up quite a reputation over time. It allows users to not only monitor real-time financial data, but also offers the ability to access breaking news and place trades.
The Bloomberg terminal is quite costly, however, and you can expect to pay between $20,000 to $25,000 per year for this access. Luckily, it’s not the only stock terminal available in today’s market.
Benzinga Pro is Benzinga’s answer to the lack of affordable stock terminals available on the market. We are proud to offer this alternative to Bloomberg terminal to allow investors access to important financial data without breaking the bank. It offers a real-time newsfeed that can update you on breaking news in the investment world. You can expect to see updated information on activist stakes, earnings releases, conference call key points, analyst ratings, rumors and many more alerts.
With BZ Pro you can create an Excel-compatible watchlist to keep an eye on the stocks most important to you. You can screen U.S. stocks by market capitalization, price and sector. The BZ Pro platform also allows you to view a breakdown of a stock’s peer group, financial statements and essential SEC filings.
This product is designed for the everyday, average investor to give day traders the tools they need to invest successfully. The platform starts at $99 per month, offering a much more affordable stock terminal option.
Another cost-efficient option is to enroll in a subscription service. Many of these subscription services are with stock advisors. The benefit of enrolling in this is that it can give you advice as well as information about the stock market. If you decide to analyze stocks yourself or use a stock terminal, you are left to make your own conclusions about which stocks are valuable. Enrolling in a stock advisor subscription program can help you make quick decisions about which stocks to invest in.
Morning Star’s service offers another perspective. It focuses on investments that produce consistent returns more than it does on using technical charts to predict stock value. It offers an analysis of stocks, mutual funds and exchange-traded funds (ETF). Morning Star also provides the pros and cons for all investments. You can use its research to compare investments to each other and see how the investment has performed over time. Morning Star also offers a stock and mutual fund screener that allows you to find investments by searching hundreds of key data points.
Many find using this service can empower you to make better investment decisions without consulting an investment advisor. Morning Star offers a $199 premium subscription service, as well as a free service for a more simplified version. You also have the option to test the premium service with a 14-day trial
Best Online Stock Brokers
Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.
Webull is widely considered one of the best Robinhood alternatives.
- Active traders
- Intermediate traders
- Advanced traders
- No account maintenance fees or software platform fees
- No charges to open and maintain an account
- Intuitive trading platform with technical and fundamental analysis tools
- Does not support trading in mutual funds, bonds or OTC stocks
SoFi’s mission is simple: to help reach clients like you reach their financial independence and realize their ambitions. SoFi knows that this independence comes from making decisions that help your money start to work for you in the long run. The brand helps individuals make these decisions through personal financial products such as personal loans, student loans and automated and active investing.
The brand additionally provides in-person experiences such as educational and networking events, personalized guidance from experienced financial planners and one-on-one advising with professional career coaches. SoFi’s services have been highlighted in outlets such as Forbes, Medium, and CNBC’s Make It.
- IPO Investing
- Mobile Investing
- U.S.-based customer service
- Highly-rated mobile app for iPhone and Android
- Only available in the U.S.
Moomoo is a commission-free mobile trading app available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it’s backed by venture capital affiliates of Matrix, Sequoia, and Tencent (NASDAQ: FUTU). Securities offered by Futu Inc., regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Moomoo is another great alternative for Robinhood. This is an outstanding trading platform if you want to dive deep into smart trading. It offers impressive trading tools and opportunities for both new and advanced traders, including advanced charting, pre and post-market trading, international trading, research and analysis tools, and most popular of all, free Level 2 quotes.
Get started right away by downloading Moomoo to your phone, tablet or another mobile device.
- Cost-conscious traders
- Active and Advanced traders
- Over 8,000 different stocks that can be sold short
- Access trading and quotes in pre-market (4 a.m. to 9:30 a.m. ET) and post-market hours (4 p.m. to 8 p.m. ET)
- No minimum deposit to open an account.
- No chat support
eToro is a broker that offers access to over 25 of the world’s most popular cryptocurrencies, forex and over 1600 stocks. They have a few unique education and useability tools. Traders can begin buying and selling in as little as 10 minutes.
eToro’s unique CopyTrader feature allows new investors to “copy” the buy and sell orders of professional investors, while the company’s eToro Club feature provides investors with a range of additional education tools and resources.
- Traders looking for an easy-to-use platform
- Traders who want to practice their trades using a virtual account before entering the market
- Simple platform that is easy to master
- CopyTrader feature that allows new traders to copy the same strategies used by professionals
- Virtual dummy account that gives you $100,000 to practice trades
- High non-trading fees
E*TRADE is an online discount trading house that offers brokerage and banking services to individuals and businesses. One of the first brokers to embrace online trading, E*TRADE not only survived both the dot-com bubble and Recession — it thrived. You can choose from two different platforms (one basic, one advanced). E*TRADE is a suitable broker for traders of most skill levels, whether you want to buy mutual funds and hold them for decades or dabble in options swing trading. E*TRADE offers a library of research and education materials to help you out.
- Active traders
- Derivatives traders
- Retirement savers
- Sophisticated trading platforms
- Wide range of tradable assets
- Exceptional customer service
- Limited currency trading
- Higher margin rates than competitors
- No paper trading on its standard platform
This latest groundbreaking technology is IBKR GlobalAnalyst, a new trading tool that helps investors compare the rate of PEG or price-earnings growth valuations and provide more immediate and comprehensive financial metrics of stocks, globally.
Recognizing that stock selection can be challenging for investors to compare the valuations of domestic and international stocks, Interactive Brokers created GlobalAnalyst to offer investors a simple, yet powerful tool to easily evaluate investment opportunities around the world.
Using GlobalAnalyst, investors can search for stocks by region, country, industry, market capitalization and currency to uncover undervalued stocks worldwide. The resulting table displays the current market and financial metrics, including the PEG Ratio. The PEG Ratio is the PE ratio divided by the three-year compound earnings growth rate, and smaller PEG Ratios typically indicate undervalued companies.
- Price earnings growth valuations
- Easily evaluate investment opportunities
How to Navigate the Stock Market
The stock market can be a confusing place. There are a number of options you can choose from when it comes to determining which investments are right for you. You can use the ratios provided in this article to analyze stocks for yourself. You might decide that using a stock terminal like BZ Pro would be beneficial for you. A subscription service might also work out well for you if you’d like to receive more pointed advice to help you make your investment decisions.
Ultimately, the best way to analyze stocks is the one that works for you. Consider your options and decide how comfortable you are with navigating the stock market on your own. Compare services to figure out which one works best for your budget and investment goals.