Sometimes, the best way to gauge how a financial investment will fare in the future is to take a look at how the investment has fared in the past. By viewing historical data, or past information on the performance of a stock as measured by profitability and revenue growth in addition to trading activity, an investor can tell the difference between a winning investment and a losing investment. Although there are no guarantees when investing in the stock market, investment professionals such as market technicians rely on historical data, and such information can benefit small investors, too.
By studying historical data surrounding stock market activity, investors are more likely to uncover trends that can help determine the best time to invest. Certain trends to look out for might include the way that a stock performs during an economic pullback or conversely during booming economic times. Also, historical data will illustrate to investors the highest-ever stock price that a company has achieved. It also will reveal the lowest value that the stock has ever had. By considering this historical data, investors can formulate a trading range that is based on historical performance and is feasible to expect with that investment.
Some of the common time periods used for looking back include six-month, one-year and three-year intervals. An investor can view the information in terms of price data using numbers obtained from an investment website or by utilizing the charting capability on such a website. By viewing historical data in number form, the investor can see how a stock has performed since the first day it began trading in the public markets. The same can be achieved with a chart or graph, but these illustrations tend to be easier on the eyes and will illustrate in pictures the trading health of that company.
Some of the key areas of historical data to view include past earnings performance and revenue growth. Earnings are a representation of a company’s profitability, and they give investors an indication of a reasonable profit picture. Usually, a company will list its past earnings data on the investor relations page of its website, and the same applies to revenue growth.
The future of a company is dependent on many factors and can be unpredictable. By considering historical data, however, investors can gain a glimpse into what the company has delivered in the past. This can help an investor determine whether a potential investment lines up with the amount of risk and unpredictability he or she can handle.