Stock Ratio Explained : How to Choose Good Stock within 3 Minutes

My five years of investing experience explained.

Dedicated for all of you that are looking for financial freedom, here are some key takeaways to choose good stocks.

Correlation Between Profits (x) and Stock Prices (y)

1. Stock Price Always Follow Profits
   As you can see the image above, there is really high correlation between EPS (Earnings per Share) and Stock Prices so basically “stocks go where profits go” but for indicator of good profit company, you can use PE ratio (P/E) under 15 and lower is better.
2. Price to Book Value
   Other easy way to pick stock is searching for < 1 Price to Book Value which is price of stocks compared to each revenue. P/B < 1 is considered excellent, 1–3 is considered good and P/B > 3is considered overvalued.
3. Where to find the information ?
   You can check this website called https://companiesmarketcap.com/ it have graphics of EPS and P/E ratio which is useful whether the company is growing in a profitable way or not.

EPS data are released every year so the graph won’t be that good

Final Words

These are the way I screen stock, of course comparing to different industries is needed and use your money with caution.

If you are confused, just buy snp500 every month, it’s already proven that this is a safe investment for a long term (5+ years).