ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Understanding Investor's Business Daily's Stock Rating System

Updated on September 13, 2011

Personal investing seems like a perilous feat in this down economy, but gaining a little extra return on investment is more than possible for those who are willing to take the time to understand the stock market and how it operates. One of the best ways to learn about anything is to ask those who have gone before and already learned the ropes. The same is true about investing your money in the stock market. Investor's Business Daily (IBD) is an excellent resource for anyone who wants to get a good understanding of the market and the best opportunities in the market. This hub discusses some of the stock rating features complied by IBD staff that can help you grow your money in any economy.

About the Investor's Business Daily's

Investor's Business Daily is a daily newspaper designed especially for those who want to invest their money through any market traded issues like stocks, bonds, and mutual funds. The investment newspaper offers many helpful tools for gaining pertinent information about the stock market including news reports, earnings reports, and tables.

Investor Business Daily's Stock Rating System

The stock rating system designed and employed by IBD to rate the potential of a stock issue is one of the most helpful tools available for investor's to research and track corporations traded in the stock market. Essentially IBD rank each stock on five criteria including:

  1. Earnings Per Share
  2. Relative Price Strength
  3. Sales + Profit Margin + ROE (return on equity)
  4. Accumulation and Distribution
  5. IBD's SmartSelect Composite

Earnings Per Share Rating

This Earnings Per Share rating compares a company's last two quarters and last 3-5 years of profit growth with all other companies. Each companies' earnings are then given a rating from 0-100 with 100 being the best. If a company lands a rating of 95, it means that they have higher earnings strength than 95% of companies. (IBD)

Relative Price Strength

The relative price strength rating follows each company's stock price changes over a 12 month period and compares them with all other companies. IBD says that the best companies to invest in rate 80 or above in both the earnings per share and relative strength categories.

Sales + Profit Margin + Return on Equity Rating

This rating combines recent sales growth, profit margins and return on equity in an A to E rating. In this category, A is the highest grade and E the lowest.

Accumulation/Distribution Rating

This indicator uses a price and volume formula to whether a company's stock is under accumulation (being bought) or distribution (being sold off) in the last 13 weeks. It also uses an A to E rating scale with A meaning the stock is undergoing heavy buying and E signifying that investor's are dumping it.

IBD's SmartSelect Composite Rating

IBD's SmartSelect composite rating combines all five IBD ratings into 1-99 rating scale. Those stocks that earn a 99 score are deemed to have the best overall strength for investment and thus the most potential for a fair return on investment in the immediate future.

Not a Guarantee for Financial Success

Even though Investor's Business Daily's stock rating system is a very helpful tool for determining how to invest money in the stock market, potential investors should not think that this hub offers any guarantee that using IBD's system will assure financial success or positive returns on investment. Investing in the stock market has inherent risks and there is as much potential for losing money as growing your money.

Investing for the Long-term

What is the best vehicle for investing personal finances over the long-term?

See results

Comments

    0 of 8192 characters used
    Post Comment

    • ecoggins profile imageAUTHOR

      ecoggins 

      8 years ago from Corona, California

      Pamela, Thank you for your encouragement. Mutual funds are a very smart way to invest. Even if their current three, five, and ten-year averages are not very impressive, historically they have done very well and have outpaced every other type of investment category even real estate.

    • Pamela99 profile image

      Pamela Oglesby 

      8 years ago from Sunny Florida

      It is difficult to know what to do with investments at this point as I don't have the knowledge you do. Primarily we use low risk mutual funds with a mixture of bonds and pray. Very good hub.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)