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Illustration by Ally Jaye Reeves

Investing on your own can be a rewarding experience - and the more information you have, the better off you’ll likely be.

That’s why The Globe and Mail’s Watchlist feature is an invaluable resource for investors of all levels of experience and sophistication.

Whether you are looking for new opportunities or wondering if you should stick with your current holdings, the expansive set of tools here should give you what you need to make informed decisions.

Need an introduction? Here’s how to use Watchlist to analyze a stock in five easy steps.

One. Let’s find that stock.

Sure, you might have a tip or you might have a hunch. You might also own a stock already, and want to see how it stands up.

Either way, it never hurts to start your stock analysis with a look at how the stock that has grabbed your attention measures up in any number of ways.

Look at how a stock is performing relative to peers, an index, or any group of holdings you might be interested in. It’s also simple.

Click on the Watchlist tab at the top right of the Globe’s homepage. Then click on New Watchlist, give it a name and enter whatever ticker symbols you like.

Don’t know the symbol? No worries: Start entering a company name and the Watchlist will offer suggestions. You can also pick indexes or exchange-traded funds, which will give you a benchmark performance by which to compare stocks.

Here’s where things get interesting: Once you’ve created a watchlist, you can rank the components in a number of different ways, giving you insight into their key features.

Look for the middle dropdown menu called “main view,” which is the default. This will give you daily information about stock performance, including intraday highs and lows.

Now change from the default to “performance.” This will give you performance statistics over a number of longer-term periods, including five-day, three-month and 52-week.

If you click the up-down options next to each heading, you can rank all of the components in your watchlist, giving you a quick way to gauge what’s winning and what’s struggling over various periods of time.

That’s a good way to scan for potential underperforming bargains, identify strong momentum plays or even see which stocks might be getting ahead of themselves.

If you’re keen on hunting for stocks with attractive distributions or payout growth, change the “performance” view to “dividend” view.

Then, you can rank your holdings in a number of dividend-centric ways: the size of the latest distribution, which shows the most recent payment on a per-share basis; the dividend yield, which assumes the most recent payout continues for the rest of the year; and the five-year growth rate for the payout, which will tell you which dividends are rising the fastest.

With these different approaches, you can get a good look at how the stocks in your watchlist are performing in a number of ways – and which ones are worthy of further exploration.

Two. Let’s take a closer look.

Watchlist also lets you choose the information you want to track, giving you greater control over which stock features you want to see whenever you log in.

In the drop-down menu that currently has “stock views” as the default, change to “custom,” then “create.” Now, you can select from dozens of additional features under more than half a dozen broad categories, such as “general,” “fundamentals” and “technical analysis.”

Within the “general” tab, trading volume can tell you whether a stock in enjoying a surge in popularity among traders. The exchange will tell you where the stock is trading. And the sector category will give you some information about the stock’s peer group and whether you’re getting proper diversification among different sectors (if that’s your goal).

Under the “technical analysis” tab, you can see where a stock is trading relative to its average price over the past 50 days, 200 days, and several other periods. Or, you can explore trends by looking at a stock’s relative strength over various periods.

Also under “technical analysis” is a moving average convergence divergence (MACD) option. This is a momentum indicator that traders often use.

What’s more, seeing everything in columns within your watchlist makes comparisons a snap – and it’s a lot faster than delving into quarterly reports from each company or parsing analyst notes.

Three. Time to dive into the financial data.

The best-performing companies aren’t necessarily profitable, at least in the near-term. But it’s important to know who’s making money and who’s losing it so that you can get a sense of what stock prices may be reflecting.

If you looked at, say, Shopify Inc. and Royal Bank of Canada using their respective 2021 numbers, you would discover a stark difference between the two Toronto Stock Exchange-listed behemoths.

The Ottawa-based e-commerce giant lost more than US$370-million in its fourth quarter, while RBC generated a profit of nearly $3.9-billion in its fiscal fourth quarter.

That doesn’t mean that RBC is the better bet. Indeed, Shopify’s share price outperformed RBC by more than 2,800 per cent over the five-year period ended December, 2021.

But it does suggest that Shopify was being valued on its customer and sales growth prospects through this period, rather than earnings. RBC was more of a play on stability – and dividends -- which gave the lender an advantage over Shopify at the start of 2022, when tech stock sold off.

In addition to net earnings, you can select information on market capitalization, revenue and even get per-share numbers on sales and earnings.

You can also investigate five-year growth rates, which will tell you how fast a company is increasing its sales and profits. That’s important information if you want to know if the market is ignoring a company that is performing well, or giving too much credit to a company that is clearly struggling.

A lot of this information is essential for stock analysis, giving you the tools to satisfy your inner Warren Buffett.

Four. Fun with financial ratios.

You can crunch your own ratios - another yardstick with which to measure how a stock is performing - using the raw numbers on Watchlist or even delve into company reports for more details. But Watchlist provides many of the essential figures for assessing valuations, saving you some time and energy.

Within the “fundamentals” tab of the custom view, you’ll find a dozen such ratios.

Let’s start with one of the most popular: the price-to-earnings ratio, or PE. This ratio compares the current share price to the company’s reported earnings per-share (if the company is profitable). You can also select the forward PE, which uses analysts’ estimates for future earnings.

For example, if a stock is trading at $20 and has reported earnings of $1 per share over the past 12 months, then its PE ratio is 20. If analysts expect the company will become significantly more profitable in the year ahead, generating a profit of $1.60 per share, then the forward PE is 12.5

Do these ratios point to an expensive or cheap stock? A lower number is generally a cheaper stock. But you might want to compare the ratios with peers, which will tell you if the stock you are eyeing stands out.

The price-to-earnings to growth ratio (PEG) takes things a step further by comparing the PE ratio to the company’s annual growth rate. The rule of thumb: Anything below 1 may be a bargain worth looking into.

Watchlist will also give you profit margins and return-on-equity, which help you assess profitability from other angles. The price-to-sales ratio can be good for assessing the valuations of companies with scant earnings or none at all.

And the debt-to-equity ratio will help you understand if a company has onerous debt levels that could be problematic if the business operations falter. A low ratio can mean the company enjoys a safe buffer.

On their own, financial ratios can’t really point you to stocks as definitive buy or sell opportunities. They can, however, help build your case.

Five. Track your performance.

Stock analysis doesn’t end when you’ve reached your decision and made your trade. You can monitor the ups and downs of the stocks in your portfolio, and look for further trading opportunities – whether you are a buy-and-hold investor or an avid trader.

This is where Watchlist, again, offers a number of useful tools.

You can enter target prices into your portfolio, giving you an easy way to gauge whether a stock is approaching your buy or sell price. And you can track unrealized gains and losses – that is, the increases or decreases in the value of your current investments - giving you a quick assessment of how well your stock picks are performing.

Not quite ready to commit to making actual trades? No worries. You can make several watchlists, and track hypothetical portfolios and learn about investing without risking any money.

When it comes time to make a trade, you’ll be ready.

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