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Investing in Stocks over the last 100 years has been the most reliable rate of return compared to any other investment vehicle. Yes, that does include even Real estate. Donald Trump , eat your heart out !!

Of course, there are many critics who will tend to disagree. They cite events like the Great depression of 1929 or Black Monday back in 1987 when the Market crashed as examples of why not to invest in the Stock Market.
However, just like anything in Life the Stock Market does have it lulls where appreciation in the value of a stock investment actually may decrease over a short period of time.

But if you buy a quality stock backed up by a reliable Company, and hold it for a period of years you will reap rewards that many only dream of !!

So the question is how do you find the quality stocks and the companies behind them ??

Here are 3 important criteria you need to analyze when stock picking and trying to find that winner.

1. EPS- This stands for Earnings per Share. You take a Company’s total earnings and divide it by the total number of available shares. The higher the number the better. And it could be a stock pick that pays off handsomely.

2. P/E Ratio – This stands for Price to Earnings Ratio of a Company. Here is an example of this ratio.
Company XYZ makes $1,000,000.
Company XYZ has issued 100,000 shares of stock.
Company XYZ stock is trading for $30 a share.
The P/E then would be the Price of the Stock divided by the Earnings of the Stock !

So the Earnings $1,000,000 (Earnings) / 100,000 (# of shares) = $10 Earnings per Share.
So Company XYZ has $10 profit for every share it has issued.
This would be the Earnings part of the P/E Ratio.

So now take the price $30(The Price of each share) /$10 (The Earnings per Share) = 3.

So Company XYZ has a P/E of 3.

Generally, the lower the P/E the more value there is in the Stock. And it could be a possible buy.

3. Institutional Sponsorship – This is very important. This statistic shows the number of mutual funds, hedge funds, pension funds, and insurance companies that own the stock and the amount they own. The more funds that hold the stock the better. And this could be a potential buy !!

I hope this help gives you an understanding of what to look for when stock picking!

Article Source: http://EzineArticles.com/?expert=Robert_Marsh
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