These 5 Numbers Determine When to Buy a Stock

It can be overwhelming when you are evaluating a company and considering adding it to your portfolio, but I believe there are five numbers that are key with any company. 

Before investing any money into a company, make sure you look at these five numbers. They can tell you exactly when to buy a stock or when to let it pass you by.


Return on investment capital is an extremely important number to look at. This number will show you how the company is using the money that it invests back into operations. If this number is strong, that is usually an indication that the management team is looking out for the investors, which is me and you.

If a company has been around long enough, let’s say at least 10 years, then I believe that this number should be no less than 10% on average. 

Apple (AAPL) is a perfect example of a company with a strong ROIC with an average of over 25% over the past decade.

Sales growth rate

This one is pretty self explanatory. Are sales increasing or decreasing each year?

The idea here is to see sales growth of at least 10% each year, on average. You should note that events can happen from time to time which can drastically skew this number in the short term, so I believe it’s best to look over the long term. 

If a company is increasing sales each year then it is more than likely a strong company that will continue to grow year over year. 

EPS growth rate

Earnings per share growth rate is the third number that I look at when evaluating a company. This number shows the track record of how much money a business is making for its owners over a given period of time due to changes in their profit and issuing out new shares.

If this number is increasing each year then it’s a good indication that the company has strong fundamentals and is probably worth the consideration.

Equity growth rate

Although standard equity can vary within different industries, the equity growth rate will show you if a business can continue to generate cash that they can use to continue paying off any debt. 

If this number is strong, it will also allow a business to increase its impact in the market as well as focus on developing new products. 

Operating cash flow growth rate

This number will show us if the business is able to grow its real cash while continuing to increase its profits. Having cash on hand is key for a business to sustain long term and continue growth each year.

If this number is too low or not growing it can be an indication that a company might have to take on more long term debt in order to keep operating at optimal capacity and keeping up with its competitors.

Recommended Articles

5 Franchises You Can Buy for Less Than $80K

A convenient way to start a business is through a franchise. There is an already built-in business model, consumer base, and operational supply chain. However, if you join a globally-known

How to Encourage Loved Ones to Adopt Healthy Eating

It’s painful to watch loved ones suffering with chronic health problems, such as food intolerances, headaches, allergies, digestive pain and menstrual issues. We wish there was something we could do

How to Retire 15 Years from Today

Retirement planning should ideally begin from the day you have your first job. However, even if you have made no special financial preparations for your retirement, you could still start

The Cost of Owning a Pet Can Be Surprising, So Plan Ahead

A cat or dog can be cute, cuddly, and great for companionship. Yet the cost of owning a pet can be surprising. Pets are living beings that must be taken

Dump Growth Stocks for Value? Market Weighing Options

In this article I make a brief comparison of growth stocks versus value stocks, a topic often addressed by the mainstream financial media.Growth stocks typically offer a substantially higher growth

7 Countries Where You’ll Find Bugs On the Menu

Creepy, crawly, gross, slimy. There are several ways to describe bugs, but here in the United States, few of us would use the words “delicious” or “yummy” when talking about

Get Rich Slowly with a Slick Dividend Reinvestment Strategy

The time-tested wisdom from leading value investors has always been that if you want to make money in the stock market, invest in high quality stocks and do not sell

A Surprising Way to Get Health Benefits from Coffee

You may have heard of green coffee bean extract for weight loss, but this potent natural remedy offers other important benefits, too. Read on to discover how green coffee bean

4 Ways to Make Extra Cash Using Your Car

Owning a car does not necessarily have to be an expensive proposition. While you cannot avoid paying the auto loan installments or the car insurance and maintenance costs, you can

Paid Not to Work: How Universal Basic Income Might Compensate for Coming Job Losses

The unemployment rate for the United States represents only the amount of people who are unemployed and also actively looking for work. Separately, the workforce participation rate includes Americans were unemployed

Meet the People Who Built or Inherited Fortunes — Then Lost It All

It’s amazing how much money rules our lives. The average person will barely make $1 million over the course of a working lifetime. Meanwhile, in the United States and all

Luxury Used Cars You Can Buy Cheap and Almost New

Looking for a luxury used car you can buy cheap? Careful what you wish for. First-time owners of luxury vehicles don’t always appreciate maintenance and repair costs. Uninformed buyers may