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Investing in the stock of a company entails some amount of willingness to scrutinize the company’s management. With that goal in mind, there are various questions you can ask the management regarding the business. After all, public companies are required to give important details and answer important questions. Here are some of those questions you should be asking.
The Sales of the Company
You should ask where the company sees its sales trending in the next one or two years. This time horizon will give you a good feel of the opportunities as well as the threats that could appear over both the short and medium term.
This type of question also lets the person answering the question to provide a broad response. He or she may also mention some other related issues on the matter.
Costs of Materials and Services
The goal here is to gain some insights with regards to the company’s gross margins. If you get some insight there, you can also get some insights regarding the company’s future potential earnings.
Ask what risks are linked to the costs of raw materials or labor costs related to sourcing. This lets the person answer broadly and touch various subjects.
The Company’s Competitors
Ask the person about the emerging competitors in the industry in which it operates. When the company official answers this question, you will get some insights regarding the company’s competition.
Who are its competitors right? Who will be the main competitor in the future?
You can use the answers to this question to learn about new products or services that may be entering the market. Such things can likely impact the company going forward.
As a result, the management may also share some of its plans regarding its approach or tactic to deal with these competitors.
The Company’s Challenges
Apart from the competitors, the company may also be facing some troubles now in terms of its challenges.
The answer to this question will let you identify possible weakness in the company’s organization and provide some insight into the future earnings.
More importantly, keep in mind that what the challenges are is just one part of the bigger puzzle. An equally important thing you shouldn’t overlook is the company’s plan to deal with these challenges going forward.
Strengths of the Business
Another very important question to ask is whether the management thinks it has some core strengths that haven’t received sufficient attention from the market.
This question will compel the company official to somewhat divulge more information about the company’s positive points.
The answer will also likely reveal where potential upside earnings surprises come from. This is important because this allows investors to decide to buy the stock before the impact.
Stock of the Company
Never forget to ask whether the management have plans in place to promote the stock to individual or institutional investors.
This makes it reasonable for savvy investors to buy into the stock before buying pressure increases. Investors who are searching for the best entry and exit points may also find this question particularly helpful.
