How do I know if a company has potential to grow?
Before you invest in a company, make sure you do your research. It is important that you understand the company’s business and its products or services. There is no guarantee, as there is always some level of risk with investing, but here are some things to consider so that you can be as comfortable as possible with your choices:
- Financial performance – a company’s financial statements can help you understand how their business has done in recent years and how they are investing for the future. What are their assets vs. liabilities?
- Business costs – are the costs of the business going up but the sales are not? This may be a warning sign.
- Directors and officers – does the management of the company have a good track record?
- Risk factors – you can find out about the company’s future risks by reading the management’s discussion and analysis (MD&A)
A public company’s financial statements, prospectus and MD&A are filed on the System for Electronic Document Analysis & Retrieval (SEDAR) at www.sedar.com. Learn more about where to get information on a company before you invest.
If you need help assessing the potential value of different companies and whether they are good options for your investment plan, speak to a registered financial advisor.