Whenever we plan to buy stocks for your portfolio, we need to make sure it is free from any red flags (or has a minimum of them). Red flags are simply warning signs that indicate a potential threat to the stock in the immediate future or the longer run.
These warning signs could be no profitability in the last few quarters, technically overbought stock, falling profit margins, expensive valuations compared to peers, etc.
But to learn about all such red flags, one has to deeply dive into the financials of the company which is not a suitable solution for everyone, especially for those who do not have a finance background.
So, the easiest way is to take the help of ProTips – a feature of InvestingPro+ which is an algorithm-driven personal advisor for the user that points out these warning signs in the most simple form. But that’s not all, ProTips is also trained to give you all the green flags (good signs) in the stock you are considering without even bothering you to read the financials.
Let’s take the example of REC (NS:) Limited. The profile page of the stock has these red and green flags listed for investors to have a quick glance. As you can see, ProTips has already listed that the company is quickly burning through cash which is a negative sign.
However, on the contrary, there are plenty of green signals such as low P/E, consistent dividends for the last 16 years, enough liquid assets to cover short-term obligations, etc. Investors need to compare both the red and green flags to better gauge their investment decisions.
But, there’s more. Investors can click on any of these to expand that specific in info and see it in detail. For eg. while clicking on the dividend info, investors can see a long history of the yield (green), the stock price (blue) and DPS (red), all in a beautiful graphical representation.
This way investors can better time their investment. For eg, if you see a falling stock or a rising dividend yield on the chart, it is a good time to accumulate stocks for the long term.
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