Researching a stock, and the mistakes to avoid

Fundamentals: what the business is worth

Fundamental analysis asks what the underlying business is actually worth: its profit, and how much you're paying for that profit. Earnings per share is profit divided by share count. Book value per share is roughly what each share would be worth if the company sold everything and paid off every debt today. Dividend yield is how much cash income the stock has paid relative to its price.

Those combine into the two ratios you will see quoted most often. The P/E ratio is price divided by earnings per share, read as “how many pesos am I paying for one peso of annual profit.” The P/B ratio compares the price to book value instead. Both come from a company's own real annual financial reports on its stock page, not an estimate, and both are shown only when the company has reported the figures needed to calculate one.

A ratio on its own means very little. A P/E of 5 can mean a bargain or a business the market expects to shrink. The useful move is comparing a company against others in the same sector, then reading its actual disclosures to understand why it sits where it does.

Technicals: what the price has been doing

Technical analysis instead studies a stock's own price history for patterns, on the theory that recent price behavior says something about what happens next. PSEye computes several of these for every tracked stock: moving averages, RSI and MACD as momentum indicators, and volatility, beta, and correlation as risk measures, all on the analytics page and each stock's own page.

None of these predict the future with certainty. They describe what has already happened, and are one input among many, not a signal to blindly follow. Neither approach is the “correct” one on its own, and plenty of investors use a mix of both: fundamentals to help decide what to buy, technicals to help decide when.

Common first-timer mistakes

A few patterns trip up new investors far more than any of the mechanics in this guide ever do:

• Buying on a tip without reading anything.A company's own disclosures take a few minutes to skim and are the actual primary source, not a forum post or a screenshot.
• Putting everything into one stock.Spreading money across companies and sectors means one bad outcome doesn't sink the whole account, see how holdings are grouped on the sector pages.
• Reacting to every daily swing. A stock moving a few percent in a day is routine, not necessarily news, the Daily Recap exists so you can check in on your own schedule instead of watching a live feed.
• Trading small amounts too often. Commission and the stock transaction tax are charged per trade regardless of size, so frequent small trades quietly eat more of the return than the same money moved less often.
• Ignoring liquidity. Buying a stock with very little daily trading value can mean paying more to buy and getting less to sell than the last quoted price suggested, since there may not be enough other trades happening at that price.
• Confusing price with value.A ₱5 stock isn't automatically cheaper than a ₱500 one, and a stock that has fallen a lot isn't automatically a bargain. What matters is what you're paying relative to the business, not the number on the ticker.
• Reaching for margin or leverage before understanding it. Borrowing to invest amplifies losses the same way it amplifies gains, worth understanding thoroughly, and asking your broker to explain in full, before ever using it. PSEye doesn't cover margin trading.

The tools to do it with

This is what the rest of PSEye is built for. Now that the mechanics are out of the way, these are the pages worth knowing about:

None of it replaces your own judgment or a licensed advisor's.