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How to analyze a stock

April 16, 2024
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EasyEquities
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EasyEquities

Doing your own research is hugely important when it comes to investing.

Welcome to the EasyEquities Mentorship program, where we make investing EASY for you!
We have prepared 6 modules that we will post on FinMeUp.

The modules are intended to give investors the necessary knowledge to start their investing journeys.

Lets get into it!

To make this easier, we will break it down for you into 3 simple steps:
1) Understanding the business.
2) Financials.
3) Researching leadership and management.

This article is all about step 1.

1/ Understanding the business

Every step in researching a stock is equally important, however, understanding the business forms the foundation for researching any stock.
Investors should understand that behind every share price, there is an underlying business. The goal is to find out as much as possible about that business because it ultimately drives the share price in the long term.

NB: It is probably best to write everything down.
In this stage of researching a stock, we ask ourselves these very simple questions:
What does the business do?
What is their business model?
Who are their customers?
What are their competitive advantages?
What is the outlook of the industry?

Throughout this module, we will use Shoprite as an example.

Disclaimer
Please be aware that this is a very simple framework to follow as we are not financial analysts. This is not financial advice.

Shoprite

Shoprites core business is in food retailing, complemented by furniture, pharmaceuticals, hospitality, ticketing, and cellular services.

Let's take a look at some of their brands.
Their brands include:
Shoprite
U$ave
Checkers
Checkers hyper
The entire OK franchise division
House & Home
Liquor Shop
Checkers sixty60
K'nect
Medirite Pharmacy

These are brands that we use every day.

Shoprite store locations (As of 2021)

Shoprite has over 2 400 stores throughout Africa. South African stores account for more than 2 200 of those stores. Namibia has 95, Angola has 36, Botswana has 33, Zambia has 51, DRC has 3 and the rest of Africa has 108 combined.

Shoprite store count

Shoprite has a diverse selection of stores. More specifically, they have 527 Shoprite stores, 339 LiquorShops (Shoprite), 235 Checkers, and much more. 

More on Shoprite

Shoprite is SA's largest fast-moving consumer goods retailer. Its purpose is to be Africa's most affordable, accessible, and innovative retailer. Shoprite does this very well. Shoprite has a huge focus on customers. This means that SHP is CONTINUOUSLY working to meet customer demands.

The thing about customers is that they are never satisfied. This pushes Shoprite to keep doing more. Amazon is centred around customers and look what they have achieved.
Shoprite is positioned as a leader in the industry and on the African continent. This is evident in infrastructure, systems, and intellectual property and is reflected in the way customers respond to offerings.
 


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