As an investor, you need to know when to buy shares of any company, and after you purchase the claims, the second step is to sell those stocks or securities at the best price. For buying stocks when undervalued and selling it when it is overvalued.

Now in your mind, there must be an eagerness to know what is undervalued or overvalued stock! Don't worry; we will discuss these terms in our top ten list of suggestions. If not, I am leaving a link about the value stock here: https://www.investopedia.com/terms/v/valuestock.asp.

Before we go to our top three list of suggestions, I have a question for you! What is your prime key in the stock market? Is it Investing or Trading? After our top-ten list, I will be giving you a bonus tip based on your trading style, so stay tuned.

So here we go, the life-changing suggestions that might bring your trading or investing style to significant levels of improvements and success. I am listing all my top ten tips when I started investing in the stock market.

My Top Three list on how and when to Buy or Sell your perfect Stocks!

Understand the Company's Fundamentals: The first step is to know the company's primary aims, targets, and future potentials. For example, if you have to choose between purpose and precision, what will you choose? It will create many conclusions by your side, but the truth is you should have both for performing better in the stock market. The consistent company with the best fundamentals or the base has the precision, aim, and potentials.

So what are the fundamentals of any company? What do fundamentals reflect about a company? We will discuss that deep, so pay attention and have a coffee by your side to keep yourself energetic throughout the paragraph.

Fundamentals are the basic characteristics/structure:

Fundamentals are the essential characteristics or structure of a company that measures the company's financial stability and the health of the company's assets. 

Always find a company that has more significant assets, fewer liabilities, and adequate equity. All the information about the financial condition of the structure of a company is reflected on the balance sheet.

The company's assets are the cash, inventories, and properties, which can generate cash flows, reduce expenses and improve sales. It is the capital owned by a company or the economic resources of an entity.

Liability is simply what a person or a company owns and is liable to it—for example, rent, wages, utilities, taxes, loans, etc.

Equity is the ownership that a person gets, either by buying shares or the securities of a company.

The bottom line is to buy the shares of a company with fewer liabilities so that company can give you higher equity. And sell the shares of a company that owns high debts as it won't be able to provide you with higher rates of returns.

1. Perform Fundamental Analysis of a Company 

We have always heard that we should invest in a company which has excellent fundamentals. But how do we know if a company is fundamentally strong or not? Can we measure the fundamentals of a company?

And the answer is yes; we can measure a company's fundamentals by performing a fundamental analysis of a company. It is one of the essential steps or analyses before selecting a company to invest in.

If you want more information about the fundamental analysis, click on the link here: https://en.wikipedia.org/wiki/Fundamental_analysis.

Performing Fundamental Analysis is to find the Intrinsic Value of a Company:

I had promised you earlier that I will explain the valuation of stocks or value stocks. The intrinsic value of a company will tell the company's worth, either it is overpriced or underpriced based on its current market price.

All the successful investors have been told that "Invest in the Stocks that have less value concerning its intrinsic value." And it is true, buying stocks that are undervalued is a way to succeed in the long term but beware of the market, you can react to it, but you can't underestimate it.

I will give you guys the primary way to find the intrinsic value based on its financial metrics. The basic formula of the inherent value of a company is:

INTRINSIC VALUE = EPS * P/E * (1+r)

EPS is EARNING PER SHARE. 

P/E RATIO is PRICE TO EARNING RATIO.

R is the rate of return expected.

If you want to learn more about the financial ratios or metrics, here are the six critical financial ratios; click on the link here: https://www.investopedia.com/financial-edge/0910/6-basic-financial-ratios-and-what-they-tell-you.aspx.

How to use Intrinsic value as an Analysis!

If the current market price is less than the intrinsic value, buy the stocks as it is undervalued.

If the current market price is greater than the intrinsic value, sell the stocks or don't buy as it is overvalued.

Fundamentally Compare Company to its Peers:

After the fundamental analysis and finding its intrinsic value, you need to compare the company to its peers or its similar industry. Sectorwise entire comparison will bring a clear idea of which stocks to pick that are fundamentally strong.

Note down the key metrics to compare between companies; I will make it easy for you. Here are my top lists to compare, and they are:

the a. Debt-to-equity ratio measures the company's financial leverage, ideally ratio-within one is good, but it varies from 1-1.5 and might be different for different sectors. You can find debts(liabilities) and equity on the balance sheet.

b. Reserves and surplus net profit should be higher when comparing to different companies, which reflect growth prospects and profitability that the company is earning. Reserves and surplus are on the Balance sheet, and Net profit is on the Income statement.

c. Cash flow statements are important-they will tell how the company is using cash flows in the financing, operating, and investing. The company's free cash flows are perfect, which will reflect that the company is either down or surviving its liabilities. Use it as a future growth perspective if a company has positive cash flows.

d. EPS, RETAINED EARNING, and DIVIDENDS YIELDS should be higher while comparing it with different companies. Again, these metrics are found on the financial statement of a company.

e. P/E ratio: P/B ratio: PEG ratio should be minimum—a value near one is ideal for different companies. Compare it with different companies and find the smallest value, but remember, it can also mean that company is fundamentally wrong, so choose a fair deal for your selection.

If the above five lists match your company, then it is a buy signal, and if not, it is a sell signal if you already own the shares of that company.

Conclusion and my bonus tip for you:

In the end, I would like to say that chosen company must be fundamentally strong and sound. The financial metrics and statements are the most important to consider if you want to pick the best stocks in your portfolio. Buy the stocks that are undervalued, i.e., the current market price must be less than the company's intrinsic value, and sell the stocks that are overvalued.

BONUS TIPS:

If you are an investor or even a trader, the precise timing of buying and selling the stocks is crucial. And the best way to predict or react to the trends of supply is to learn technical analysis. Remember, "History repeats itself," technical analysis is to see the historical trends and respond to the future outcome. And the fundamental analysis is to understand the base of the company. So both research together fits best for you.