Stocks Evaluation: The Ultimate 10-Point Checklist for you

Thinking of investing but don’t know how to pick the right stocks?
You’re not alone. In a market buzzing with news, tips, and stock market today headlines, investors often miss the basics — how to actually evaluate a stock.

This blog is your no-fluff, data-backed guide. Whether you’re looking at penny stocks, dividend stocks, or the next big Nifty 50 mover, these 10 steps will help you do proper fundamental analysis like a pro.

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1. Do You Understand the Business?

Before you even look at charts or PE ratios, ask yourself: What does this company do?
Understanding the company’s business model, industry, and competitive advantage is the first step. If you can’t explain the company’s core business in simple terms, don’t invest.

For instance:

• Infosys = IT Services & Digital Transformation. Click here for detailed analysis.
• Zomato = Food Delivery, Quick Commerce (via Blinkit), Hyperpure B2B supplies

Pro Tip: Read the company’s Annual Report (https://www.screener.in/company/INFY/consolidated/) and Investor Presentations.

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2. How Healthy Are the Company’s Financials?

A stock is only as strong as its financial sheet. Look at:

Metric	Why It Matters
Debt-to-Equity Ratio	Should ideally be <1 (low leverage)
Free Cash Flow (FCF)	Healthy FCF = sustainable operations
Current Ratio	Liquidity position; >1 is safer

For example, TCS’s Debt-to-Equity is 0, which means it’s debt-free (Source).

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3. Are Profitability Ratios Attractive?

Profitability ratios tell you if the company is making efficient use of capital.

Key Ratios:

• Return on Equity (ROE) → Good if above 15%
• Return on Capital Employed (ROCE)
• EBITDA Margin

Compare these with peers. For example:

Company	ROE (%)	ROCE (%)
HDFC Bank	16.5	6.4
ICICI Bank	17.4	7.1

(Data as of Mar 2025 — Source).

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4. Is the Valuation Reasonable?

A good business isn’t always a good investment if it’s overpriced.
Check:

Valuation Metric	Benchmark
PE Ratio	Compare with sector average
Price-to-Book	<3 is usually considered healthy for banks, varies by sector
EV/EBITDA	Lower than industry average preferred

For instance, Zomato trades at a high PE due to growth expectations (Check here).

We have also done a stock evaluation of Zomato, don’t shy away from following the link.

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5. Is the Company Growing?

Growth is key for stock returns. Look for:

• Revenue Growth
• Profit After Tax (PAT) Growth
• Earnings Per Share (EPS) Growth

Example:
Infosys has grown its revenue at a CAGR of 11% in the last 5 years (Source).

If growth is slowing, even a high dividend share may underperform.

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6. How Does It Compare with Peers?

Always do a peer comparison to avoid buying an average stock in a great sector.

Example in FMCG Sector:

Company	Market Cap (₹ Cr)	PE Ratio	ROE (%)
Hindustan Unilever	6,09,000	62	20.8
Nestle India	2,42,000	82	99.3
ITC Ltd	5,50,000	25	28.4

(Data as of March 31, 2025 — Source)
You’ll notice how valuation and returns differ. That’s why peer comparison matters.

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7. Who Are the Promoters & How Is Governance?

Promoter Holding gives confidence in management’s commitment.
Generally, >50% promoter holding is considered safe. Also check:

• Pledged Shares: High pledging = red flag
• Board Independence
• Corporate Governance Track Record

Example:
HDFC Bank promoter holding is stable with zero pledging (Source).

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8. Any Recent News, Announcements, or Scandals?

Stock market news matters!
Look for:

• Regulatory actions
• Management changes
• New product launches
• Acquisitions & mergers
• Any financial frauds

You can find recent updates easily on platforms like:

• Moneycontrol
• Economic Times Markets

Example:
Zomato’s recent rebranding as Eternal Ltd. (Source) affects investor sentiment.

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9. Are There Any Red Flags or Risks?

Don’t just look at growth — look at risks:

• Sector dependency (e.g., commodity stocks)
• Legal battles
• Rising debt
• Cyclical business models
• Unprofitable expansions

Example:
Yes Bank’s NPA crisis was a classic case of ignoring red flags.

A simple stock screener search can reveal many of these issues (Check here).

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10. What’s the Future Potential?

Finally, assess the company’s future plans:

• Capex plans
• New product launches
• Entry into new markets
• Innovation pipeline

Example:
Zomato Everyday and Blinkit expansion are clear forward-looking growth strategies (Source).

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Final Thoughts (No Opinions, Just Takeaways)

Evaluating stocks is both an art and science.
This 10-point checklist is your solid foundation — whether you’re trading via a trading app, picking dividend shares, or scanning the stock exchange for tomorrow’s multibagger.

Don’t fall for stock market news hype.
Run every stock through this lens and you’ll reduce the risk of emotional, impulsive investing.

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Useful Resources:

• Screener.in for Stock Analysis
• MoneyControl – Stock Market News
• NSE India
• SEBI Investor Education

Disclaimer: This article is for informational purposes only. Investors should conduct their own research or consult a financial advisor before making any investment decisions.

If you’re a financial advisor yourself, refer to BeyondIRR for catering to your clients with top-notch technology carefully crafted to make your advisory better and tangible.

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