Your stock analysis checklist and research routine

What you will learn

• How to run a complete stock analysis in eight steps, using the tools from this course
• How to set a maximum buy price with a margin of safety
• How to write an investment thesis with clear signals that you were wrong
• A research and review routine you can sustain alongside a job

Explanation

A checklist stops you from skipping steps when a story sounds exciting. It does not guarantee a good result; it makes your decisions consistent and reviewable. Your decision is a judgement under uncertainty, and a well-researched share can still fall.

The eight-step checklist

The thresholds are rules of thumb, not laws; banks, insurers and utilities need sector-specific measures.

Margin of safety and maximum buy price

Your valuation can be wrong. A margin of safety is the discount to your estimated value that you require before buying: maximum buy price = estimated value × (1 − margin of safety). A stable business may justify a smaller margin, an uncertain or indebted one a larger margin.

The investment thesis

Write, before buying: (1) why the business is good, (2) why the price is attractive, (3) what must happen over the next 2–3 years, and (4) kill criteria: concrete facts that would prove the thesis wrong, for example "net debt/EBITDA above 3× for two years" or "the main patent is lost". Selling because the thesis is broken is different from selling because the price moved. How much of your portfolio one share may represent is a personal risk decision; position limits and diversification are covered in the risk management and ETF courses.

Research routine

• Primary sources first: annual and half-year reports, ad hoc notices and the investor relations pages of the company. In Germany, official company filings are also published in the Unternehmensregister.
• Per new company: one structured session of a few hours using the checklist, saved as a one-page note.
• Per report: after each earnings release, check the kill criteria and update the key figures (about 30 minutes).
• Once a year: reread the thesis and the annual report; ask whether you would buy the share today at today's price.

Worked example

Hypothetical example: your DCF from lesson 9 gave a base value of €25.55 per share. The share trades at €22.00. You require a 25% margin of safety because the forecast is uncertain. Trading costs and taxes are excluded.

• Current discount = (25.55 − 22.00) ÷ 25.55 ≈ 13.9%.
• Maximum buy price = 25.55 × (1 − 0.25) = 25.55 × 0.75 ≈ €19.16.
• Decision: the share is on the watchlist, not a buy. A price alert at €19.16 is set, and the valuation is updated after each report, because the estimated value itself can change.

Also note from the sensitivity table that the value was about €21.55 at a 10% discount rate. The current price already sits close to the cautious end of the range.

Common mistake

Practice activity

Hypothetical example: Company N: EBITDA €400 m, net debt €1,200 m, EBIT €300 m, interest expense €60 m, free cash flow €120 m, dividends paid €150 m. Your estimated value is €48 per share; the price is €40. You require a 30% margin of safety. On paper: (1) calculate net debt/EBITDA, interest coverage and FCF payout ratio; (2) calculate the maximum buy price; (3) decide: buy, watchlist or reject?

Key takeaways

• Work through business, quality, cash, health, valuation, capital allocation and risks before deciding.
• Maximum buy price = estimated value × (1 − margin of safety).
• Write a thesis with kill criteria before buying, and review it after every report.
• A checklist improves consistency; it does not remove the risk of loss.

Next step

Analysing single shares takes time and concentrates risk, so continue with the course "ETFs, Funds & Long-Term Investing" to learn how to build a diversified long-term portfolio.