One thing for sure, the stock market does not always bend to the whims and fancies of the investor. In most cases, it will take its own direction causing havoc to some and fortunes to rest. So how does one pick stocks that will stay consistent at all times? Although not all stocks are going to remain so, it is possible to pick a handful that will actually remain profitable for an investor. Here are some aspects you have to look into to pick the right stocks.

  1. Where does the cash flow in from?

The value of any stock increases and decreases with the amount of cash it brings in. The primary source of cash flow will reveal how profitable the stock currently is and how profitable it will be in the future. For instance, Coca Cola stocks have their profits coming in from sale of sugary drinks to a global market. The market is readily identifiable and measurable. That makes it a worthy investment.

  1. How much profit margins does it make?

A stock will attract investors only if it has lucrative earnings. Residual earnings trickle down from the operating margins of the business. Hence, an investor has to check whether the business has adequate profit margin in its operations. Without operational profits, the business will not be able to provide any residual earnings to its investors.

  1. Working capital condition

Working capital is the amount of funds required by a business to run its routine affairs without any defaults. If a company has the optimum level of working capital, it means that it able to carry out its operations in a sound manner without letting any resource remain idle.

  1. What’s the present financial condition of the company?
  • Does its stocks enjoy a steady demand in the stock market?
  • Is the net worth positive and worth investing in?
  • Are the dividend payouts consistent and favorable to shareholders?

These questions help establish the veracity of investing in a company’s stocks. For instance, Coca Cola stocks have been experiencing a constant price in the stock market. Although the company’s profits dipped slightly in the recent years, its brand recognition and asset values have helped the company retain its stock prices at consistent levels. It is better to select companies of such stature which have a proven track record of surviving economic depressions and downtimes.

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