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.

     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 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.

     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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