Growth
- Revenue growing, ideally 10% or more a year. Revenue growth (TTM and forward)
- EPS growing at least as fast as revenue. EPS growth (TTM and forward)
- Analysts' forward estimates rising, not falling.
Profitability
- Gross margin stable or rising. Gross margin
- Operating margin expanding as the company grows. Operating margin
- Positive and growing free cash flow. Free cash flow
- Return on invested capital above about 10%. Return on invested capital (ROIC)
Balance sheet
- More cash than debt, or debt easily covered. Balance sheet strength: cash versus debt
- Share count flat or falling.
Valuation
- Forward P/E reasonable for the growth. P/E ratio (price-to-earnings)
- Forward PEG near or below 1.5. PEG ratio
- Compared with peers and its own history.
Business quality
- A clear moat. Economic moats
- You can explain how it makes money in two sentences.
- It passes the The double-or-halve test.
Risks and plan
- Biggest risks written down.
- What would make you sell, written down.
- Position size decided. Position sizing
Try it Check a company on Research
See also
- How to research a company A step-by-step way to research a stock: understand the business, run a SWOT, apply the double-or-halve test, then check the numbers and valuation.
- Stock screening and scoring How to screen thousands of stocks down to a short list, and how a percentile-based scoring model ranks companies on growth, valuation and balance sheet.
- The double-or-halve test A quick way to judge risk and reward before buying a stock: compare the odds it doubles in three to five years with the odds it loses half.
Pages that link here: Building your investing knowledge, Fundamental analysis, Investing FAQ, Portfolio vs watchlist
Last updated September 30, 2026. Education only, not investment advice.