The best stocks to buy are shares of companies with the following characteristics:
1. Company with earnings per share (EPS) above 80 (EPS>=80)
If a company has displayed good growth over the last five- or 10-year period, it is likely to continue doing so in the next five to 10 years.
2. Company that has higher P/E compared to the market or industry average
If a company has displayed good growth over the last five- or 10-year period, it is likely to continue doing so in the next five to 10 years.
3. Company with a price/earnings to growth (PEG) ratio less than one (PEG<1)
A stock of a company that has a PEG ratio below one is possibly undervalued by the market. A PEG ratio of one means that the company share's price has a fair value compared to its EPS growth. A PEG ratio of more than one suggests the market is possibly overpricing the stock or it expects greater future EPS growth.
4. Company with return-on-equities (ROEs) between 13% and 15% (ROE<=15%)
High debt companies tend to have higher return-on-equities (ROEs) than low debt companies.
5. Company that have return on assets (ROA) above 20%
Company with return on assets (ROA) above 20% and higher is better because a rising Return on Assets usually foretells a rising stock price. Avoid stocks of company with Return on assets below 5%. In general, the lower the debt, the higher the return on assets.
