Stock Research Checklist: 15 Things to Check Before Buying

A practical checklist to evaluate any stock before you invest. Covers fundamentals, valuation, competitive position, and risk.

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Read the company's latest 10-K annual report (or 10-Q for quarterly)
Focus on the business overview, risk factors, and management discussion. Skip the legalese at first.
Review revenue and earnings trends over at least 5 years
Look for consistent growth or stability. Erratic swings may signal cyclical or risky businesses.
Check the P/E ratio vs. sector and historical average
A P/E far above peers without clear justification may indicate overvaluation.
Examine debt levels and cash flow
High debt relative to cash flow can be risky. Interest coverage ratio should be comfortable.
Understand the competitive moat (why can't others copy this?)
Brand, network effects, switching costs, or proprietary tech. No moat = commodity pricing.
Review insider buying/selling and institutional ownership
Heavy insider selling can be a red flag. High institutional ownership can mean liquidity but also crowding.
Check analyst estimates and recent earnings surprises
Consistent beats or misses can reveal management quality and market expectations.
Evaluate management tenure and capital allocation history
Share buybacks at high prices, overpriced acquisitions, or frequent strategy shifts are concerns.
Assess sector and macroeconomic headwinds or tailwinds
Interest rates, regulation, tech disruption. Know what could hurt the thesis.
Compare valuation to comparable companies
EV/EBITDA, P/S, P/B across peers. Outliers need clear reasons.
Verify dividend sustainability if it pays one
Payout ratio under 70%, consistent free cash flow. Dividend cuts signal trouble.
Understand the business model and unit economics
How does it make money? What are margins? Is scaling profitable?
Check for any pending litigation, regulatory issues, or governance problems
SEC filings, news search. Governance scores can help.
Consider your time horizon and risk tolerance
Individual stocks are volatile. Only invest what you can hold 5+ years through drawdowns.
Write down your thesis and price targets before buying
If you can't explain it in 2–3 sentences, you may not understand it well enough.

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