Wednesday, March 26, 2014

Understanding Stock Classifications

     When reviewing companies on the stock market, the majority of the stocks may be broken down into three classifications.  These are size, industry, value.

Size
     A companies size to investors is often called its market capitalization.  Market capitalization is determined by how many outstanding shares the stock has.  Understand that as a company grows or expands they may offer new shares, split, or buy back shares, so the size of a company may always change.  Just for an understanding large companies have a market capitalization average of the mid-billions, medium size companies are in the low billions and small are in the very low billions to high millions.  About 70% of the current market are large companies.

Industry
     Industry simply refers to what a company does to make its money. Are they in real-estate, vehicle production, technology research or distribution.  There are many industries and various ways companies earn money.  It is important to note what industry a company is in and who their competitors are when looking at a stocks value.

Value
     What value does the company have?  Is it a growth company that is just starting or is it a value company that has been around for a while and has a foothold in a certain industry.  Analyzing this classification of the company will help determine what type of profit you may gain for investing.  Often the most looked at characteristics of a stock for value is if their is an increase of its sales and earnings per share.

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