What Are Some Stock Price Prediction Methods?


Quick Answer

The most common methods for predicting a stock's price include conducting a fundamental analysis or technical analysis, states TheStreet. A fundamental analysis involves looking at company information, such as financial statements, to determine how much the stock will be worth in the future while a technical analysis involves analyzing quantitative data, such as how much the stock has been worth in the past or trends in trades.

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Full Answer

When using the fundamental analysis method, the investor may examine the company's income statement, statement of cash flows and balance sheet to determine if it is profitable and what factors are causing the company's financial results. This can point out whether the company is likely to continue to be financially healthy and a good investment, suggests TheStreet. Furthermore, the investor can track the company's stock price for 3 months, examine performance ratios and benchmark the stock against a major competitor to predict whether it will rise, fall or stay the same, notes TheStreet. In addition to the financial statements and stock data, the investor also looks at qualitative information, such as reports the company issues.

Technical analysis involves using metrics to predict how a stock price will change. For example, the investor may consider how the stock's selling price has averaged during a period of time, how strong the stock's price is compared to major competitors and the stock's volume, states InvestorGuide.com. Using this information and other metrics, the investor can make charts containing this data for easy tracking and will then look at the charts' patterns to help predict stock prices.

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