If you're considering investing in stocks that are growing rapidly, the first thing you'll be looking for is an increase in earnings. A company that is growing rapidly will have a year-over-year earnings increase (EPS) of at least 25% over the last few years.
Furthermore, the earnings growth rate over the last few quarters must also be quite high. It is not advisable to invest in a business that saw explosive growth two years ago but is currently losing money. If you are looking for the best high-growth stocks, then you can have a look at millionerinvestor.com/stock-picks.
Image Source: Google
After the earnings report, it is important to examine the growth in sales. If the sales aren't growing, it's an indication that the business is simply increasing its profits by cutting costs or purchasing back stock, which may not be sustainable over the long term.
Other numbers to consider include ROIC (Return On Capital Invested) Capital) as well as ROE (Return on Equity). Both of these numbers should be higher than 10% over the past couple of years and are expected to increase.
If you come across an investment that meets these criteria, how would you proceed to purchase it? If you are considering a new position in a company you are interested in, it is not advisable to invest the entire amount of cash you have. Even the most skilled traders cannot know the exact price and it is likely that the stock will fall once you have purchased it.
The main thing to bear in mind is that all investors make bad decisions and make losses at some point. However, if you reduce the losses you suffer and increase your profits, you'll end up making lots of cash.