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What are some tips for determining good shares to buy?

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Quick Answer

To determine good shares to buy, investors look for companies with low debt, long-term revenue growth and increasing dividend payouts. Investors also look for companies that trade below their fair value and maintain a consistent number of outstanding shares, claims U.S News and World Report.

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Full Answer

Value investors look for companies whose revenues and earnings-per-share grow consistently over a long period, typically 10 years or more. Investors also look for companies with low debt since accumulating debt negatively affects a company's earnings. Companies that pay regular and increasing dividends over a long period also carry good shares, according to U.S News and World Report. At the same time, investors avoid high-growth stocks because they are usually overpriced, states CNN Money.

Investors find good shares by looking for companies whose stocks trade below their fair value. A company trades at fair value if its price-to-earnings ratio is equivalent to the growth rate of its historic earnings-per-share. Additionally, individuals can find good shares by targeting companies that do not issue new shares. Ideally, new shares dilute the equity held by existing shareholders. These tips are not comprehensive, and investors should do research before deciding on an investment strategy, recommends U.S News and World Report.

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