How to analyze a stock using the Globe Watchlist

Illustration by Ally Jaye Reeves

Investing alone can be a rewarding experience — and the more information you have, the better off you’ll likely be.

For this reason, The Globe and Mail’s Watchlist feature is an invaluable resource for investors of all skill levels and experience levels.

Whether you’re looking for new opportunities or wondering whether you should stick with your current holdings, the extensive tools here should give you everything you need to make informed decisions.

Need an introduction? How to use Watchlist to analyze a stock in five easy steps.

one. Let’s find this stock.

Sure, maybe you have a tip or a guess. Or maybe you already own a stock and want to see how it performs.

Anyhow, it never hurts to start your stock analysis by looking at how the stock that caught your attention is performing in many ways.

See how a stock is performing against peers, an index, or a group of holdings that might interest you. It’s also easy.

Click the Watchlist tab in the upper-right corner of Globe’s home page. Then click New Watchlist, give it a name and enter any ticker symbols.

Don’t know the symbol? Don’t worry: start typing a company name and the watchlist will offer suggestions. You can also select indices or exchange traded funds that will provide you with benchmark performance against which to compare stocks.

Here’s where it gets interesting: once you’ve created a watchlist, you can organize the components in a variety of ways, giving you insight into their key characteristics.

Look for the middle dropdown menu called “Main View” which is the default. This gives you daily information on stock performance, including intraday highs and lows.

Now switch from the preset to “Performance”. This gives you performance statistics over a range of longer term time periods including five days, three months and 52 weeks.

By clicking the up-down options next to each heading, you can organize all of the components in your watchlist so you can quickly assess what’s winning and what’s struggling over different time periods.

It’s a good way to look for potential underperforming bargains, identify strong momentum plays, or even see which stocks might be overtaking themselves.

If you’re looking for stocks with attractive payouts or payout growth, switch the “Performance” view to the “Dividend” view.

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Then you can rank your holdings in a number of dividend-centric ways: the size of the last payout, which shows the last payment per share; the dividend yield, assuming the final payout continues for the remainder of the year; and the five-year growth rate for the payout, which tells you which dividends are growing the fastest.

With these different approaches, you can get a good grasp of how the stocks on your watchlist are performing in various ways — and which ones are worth exploring further.

Two. Let’s take a closer look.

Watchlist also lets you choose the information you want to track, giving you more control over what stock features you want to see when you log in.

From the drop down menu that currently has “Stock Views” by default, switch to “Custom” and then to “Create”. Now you can choose from dozens of additional features in more than half a dozen broad categories like General, Fundamentals, and Technical Analysis.

On the General tab, you can use trading volume to determine if a stock is enjoying a surge in popularity among traders. The stock exchange tells you where the stock is traded. And the sector category gives you some information about the stock’s peer group and whether you’re achieving adequate diversification across different sectors (if that’s your goal).

The Technical Analysis tab allows you to see where a stock is trading relative to its average price over the last 50 days, 200 days, and several other time periods. Or you can examine trends by looking at a stock’s relative strength over different time periods.

Also under Technical Analysis is an option for Moving Average Convergence-Divergence (MACD). This is a momentum indicator that traders use frequently.

Plus, seeing every column within your watchlist makes comparisons a breeze — and it’s a lot quicker than diving into each company’s earnings report or analyzing analyst notes.

Three. Time to dive into the financials.

The best-performing companies aren’t necessarily profitable, at least in the short run. But it’s important to know who’s making money and who’s losing it so you can get a feel for what stock prices might be reflecting.

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For example, if you look at Shopify Inc. and the Royal Bank of Canada by their respective 2021 numbers, you would spot a stark difference between the two Toronto Stock Exchange-listed giants.

The Ottawa-based e-commerce giant lost more than $370 million in the fourth quarter, while RBC posted nearly $3.9 billion in profit for the fiscal fourth quarter.

That doesn’t mean RBC is the better choice. In fact, Shopify’s share price outperformed RBC’s by more than 2,800 percent in the five-year period ending in December 2021.

However, it does suggest that Shopify was valued more on its customer and revenue growth prospects than earnings during this period. RBC has been more of a stability game — and dividends — giving the lender an edge over Shopify in early 2022, when tech stocks were selling off.

In addition to net income, you can get information about market cap, revenue, and even per-share sales and earnings numbers.

You can also examine five-year growth rates, which tell you how fast a company is growing sales and profits. This is important information if you’re wondering whether the market is ignoring a company that’s doing well or giving too much credit to a company that’s clearly struggling.

Much of this information is essential for stock analysis, giving you the tools to satisfy your inner Warren Buffett.

Four. Enjoy financial figures.

You can crack your own ratios another benchmark to measure how a stock is performing – look at the raw numbers on the watch list or even in the company reports for more details. But Watchlist provides many of the essential numbers for judging reviews, saving you time and energy.

You can find a dozen such ratios on the Basics tab of the custom view.

Let’s start with one of the most popular: the price-to-earnings ratio, or P/E. This ratio compares the current share price to the company’s reported earnings per share (if the company is profitable). You can also choose the forward PE, which uses analysts’ estimates for the future merits.

For example, if a stock is trading at $20 and has reported earnings of $1 per share over the past 12 months, then its PE ratio is 20. If analysts expect the company to be significantly more profitable and post earnings in the coming year of earning $1.60 per share, then the forward PE is 12.5

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Do these metrics point to an expensive or cheap stock? A lower number is generally a cheaper stock. But you might want to compare the ratios to those of the competition, which will tell you if the stock you’re eyeing stands out.

The price-to-earnings-to-growth (PEG) ratio takes this a step further by comparing the PE ratio to the company’s annual growth rate. The rule of thumb: anything under 1 can be a bargain worth checking out.

Watchlist also gives you profit margins and return on equity to help you assess profitability from other angles. The price-to-sales ratio can be good for gauging the valuations of companies with little or no earnings.

And the debt-to-equity ratio helps you understand if a company has large amounts of debt, which could be problematic if operations falter. A low ratio can mean that the company has a safe buffer.

Financial metrics alone can’t really point you to stocks as definitive buying or selling opportunities. However, you can help build your case.

Five. Track your performance.

Stock analysis does not end once you have made your decision and made your trade. Whether you’re a buy-and-hold investor or an avid trader, you can monitor the ups and downs of the stocks in your portfolio and look for more trading opportunities.

Again, Watchlist offers a number of useful tools.

You can enter price targets in your portfolio, giving you an easy way of estimating whether a stock is approaching your buy or sell price. And you can track unrealized gains and losses – ie how the value of your current investments have risen or fallen – giving you a quick gauge of how well your stock picks are doing.

Not quite ready to commit to real trades? Do not worry. You can create multiple watchlists, track hypothetical portfolios, and learn about investments without risking any money.

When it’s time to make a trade, you’re all set.

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