Nine Signs Of Rising Stock Price

Knowing when stock is going to go up in value is one of the key traits of a successful stock market investor. If you can identify such stock early, before the price rises, you can make yourself an absolute fortune in the stock market by buying stock low and selling stock high.

In this article, we will have a look at some of the common signs which could indicate that a stock is going to go up in value.

The more of these signs you can identify, the greater the chances will be of that stock increasing in value.

1 – Rise In Earnings

If a company has earned $1 per share for the past few years and this year its earnings are now $1.20 per share, you can view that as a good sign of a potential future increase in earnings.

Since earnings and profitability are what drive the value of a company’s stocks in the stock market, the more money a company makes the higher its stock value is likely to be.

However, one year of increased earnings doesn’t guarantee that a company will continue to experience positive growth in terms of earnings and profitability the next year or the year after.

For this reason, it is important that you look for companies which have a proven track record of positive earnings. Ideally, this should be at a growth rate of around 10 percent or higher.

Growing earnings are important for several reasons. The first is that they indicate a company is being managed well, and second, increasing earnings offset the effects of inflation which erode the purchasing power of money.

If a company’s earnings stay constant, that company’s ability to grow will decrease because the value of its money will decline as a result of inflation.

2 – Increase In Assets As Debts

The book value of a company refers to a company’s value as it appears on a balance sheet. This is equal to total assets minus liabilities.

The reason book value is important is because it tells you which companies have increasing assets and which companies have increasing debts.

Book value therefore tells you the true value of a company, and is a more accurate financial description of a company than market value which itself is often over inflated.

A company with strong fundamentals will have an increasing book value over time, which in turn will drive up the market value which will then drive up the stock price as well.

When looking at book value there are several things you should be on the look out for:

• Debt that stays at the same level as assets rise
• Assets that stay level as debts decline
• Assets that rise with debts that decline

Either one of these will increase book value, and are signs of a company with a strong financial future.

At a minimum, look for company’s that have total assets which exceed total debt, preferably at a ratio of at least 2 to 1 or 3 to 1. The less debt, the better.

3 – Positive Media Coverage

When you hear good news about a company or industry in the media, there is a good chance that stock prices are going to go up because other stock market investors will start buying those stocks.

However, don’t be fooled into thinking that just because the media is talking up a particular company that they are a good buy.

There have been many examples in the past, such as Enron, where the media has praised a company causing stock prices to soar only for them to later crash.

4 – Heavy Insider Buying

The people who know best about how a company is doing are those who are on the inside, the managers and senior personnel.

If you find individuals such as the CEO buying lots of stock for themselves, or the company buying its own stock, you can consider that to be a good sign that the company’s stock prices are going to increase.

When looking out for insider buying look for buys that occurred over several months, as this type of buying typically does not occur over a period of a few days.

5 – Stock Market Analysts

You should never make an investment decision based on what a stock market analyst tells you without doing the research yourself.

This is not to say the views of stock market analysts are not important, because they are, as what they say can very often cause stock prices to go up or down.

An influential stock market analyst who is in the public eye and recognised by investors, can be a very powerful person in the stock market.

So pay attention to what they say even if you don’t follow their advice, because they could cause your stock prices to go up and make you a small fortune.

6 – Takeover Bids

You should never make investment decisions based on rumors of a takeover bid without first analysing the fundamentals and looking at earnings growth.

However, with that said, if you are considering buying stock in a particular company and there are rumors of a takeover bid, the price of those stocks are likely to increase.

7 – Consumer Groups

The amount of profit a company makes is determined by whether consumers like and buy that company’s goods or services.

The more consumers like what the company offers, the higher its profit will be and the higher its stock prices will be.

Consumer opinion is therefore very important in determining the value of a company’s stock in the stock market.

As a result, you should pay attention to influential consumer satisfaction and other consumer feedback publications which give you an idea about what the general public thinks about a particular product.

If you are able to identify developing positive trends early, you may just be able to cash in on the next big product that everyone wants to own.

8 – Bond Ratings

A poor or deteriorating bond rating should be seen as a major warning sign for stock market investors about the financial health a company.

If a company is likely to experience financial problems in the future, the value of its stocks in the stock market are likely to decline.

Conversely, a strong bond rating (usually a AAA or AA), indicates a company is in good financial condition and is likely to perform well in the stock market in the future.

9 – Demographics

A company which targets its products or services to a particular age group can be a good company to invest in if you know that age group is going to expand in the future.

For example, if a company targets pensioners and the number of pensioners is likely to expand in the future, then it may be worth buying stock in that company because their stock value is likely to increase as more pensioners buy their products over time.

As a stock market investor you should therefore pay attention to growing trends in society. Understand how demographics are changing, which sections of the population are growing or shrinking and how society is going to change in terms of age or ethnicity.