Buying a share of stock means buying a tiny slice of a real business. So before you buy, you'd want to know the same things you'd want to know about any business you were putting money into: Is it growing? Does it actually make money? Is it drowning in debt? Are you overpaying?
The good news is you don't need a finance degree to answer those questions. You need about seven numbers, all of them free on any brokerage or finance site, and a sense of what each one is really telling you. Here they are, strongest first — defined in plain English, with a worked example each.
1. Revenue growth — is the business getting bigger?
Revenue (also called "sales" or "the top line") is the total money a company brought in before any costs. Revenue growth is how much that number changed versus a year ago.
Worked example: if a company sold \$100M of product last year and \$115M this year, that's 15% revenue growth. A business growing sales 15% a year is in a very different story than one stuck flat or shrinking. Start here because everything else — profits, cash, the stock price — eventually follows the top line. A company can't cut its way to greatness forever.
2. Profit margin — does growth turn into money?
Growing sales is only half the story. Net profit margin is the share of each sales dollar the company actually keeps after all costs: net profit ÷ revenue.
Worked example: that \$115M company keeps \$11.5M in profit, so its margin is 10%. Now compare two companies both growing 15%: one keeps 20 cents of every dollar, the other keeps 2 cents. The first has enormous room to invest, weather a bad year, or return cash to you. The second is running hard just to stand still. Growth without margin is just expensive motion.
3. Free cash flow — is the profit real?
Accounting profit can be shaped by judgment calls. Free cash flow (FCF) is harder to dress up: it's the actual cash left over after the company pays its bills and its investments in equipment, buildings, and the like. Think of it as the money the business could hand to owners without harming itself.
Worked example: a company can report a profit on paper while burning cash, or report a modest profit while generating tons of cash. If reported profits keep rising but free cash flow doesn't follow for a few years, that's a flag worth a second look. Cash is the reality check on profit.
4. Debt-to-equity — how much is borrowed?
Equity is what owners actually own (assets minus what's owed). Debt-to-equity compares total borrowing to that owner stake: total debt ÷ equity.
Worked example: a ratio of 0.3 means 30 cents of debt for every dollar of owner equity — modest. A ratio of 3.0 means three dollars of debt per dollar of equity — a business leaning hard on lenders. Debt isn't evil; it can fuel growth. But high debt turns a normal bad year into a dangerous one, because the interest bill doesn't pause when sales dip. Compare the ratio to other companies in the same industry — a utility and a software firm live in different worlds.
5. The P/E ratio — what are you paying for those earnings?
A great business can still be a bad buy if the price already assumes greatness. The price-to-earnings (P/E) ratio is the most common quick gauge of price: share price ÷ earnings per share. It roughly answers "how many years of current earnings am I paying for?"
Worked example: a stock at \$50 earning \$2.50 per share has a P/E of 20. Is 20 cheap or expensive? It depends — on growth, on the industry, and on history. The number itself isn't a verdict; it's a question. A P/E of 50 is a bet on big future growth. A P/E of 8 might be a bargain — or a warning the market sees trouble. Always ask why it's high or low.
6. Return on equity — how well do they use money?
Return on equity (ROE) measures how much profit a company squeezes from the owners' money: net profit ÷ equity. It tells you whether management is a skilled steward of your capital or just sitting on it.
Worked example: two companies each earn \$10M in profit. One needed \$50M of equity to do it (20% ROE); the other needed \$200M (5% ROE). The first is roughly four times better at turning owner money into profit. Consistently high ROE — sustained over years, not one lucky quarter — is often the fingerprint of a genuinely good business.
7. Share count trend — is your slice shrinking?
Owning stock is owning a fraction of the company. If the company keeps issuing new shares, your fraction quietly shrinks even if the business is fine — this is called dilution. The fix is to glance at the shares outstanding over the last few years.
Worked example: if shares outstanding climb from 100M to 120M with no matching jump in the business, each existing share now owns less of the same pie. A falling share count (the company buying back its own stock) does the opposite — it grows your slice. This one is easy to overlook precisely because it doesn't show up in the headline numbers.
Where to start today
If seven feels like a lot, start with just the first three: revenue growth, profit margin, and free cash flow. Together they answer the core question — is this a growing business that turns sales into real cash? Everything after that is about price and risk.
Try this on the next stock you're curious about: open a fresh note, write the seven labels down the left, and fill in each number from any finance site. You'll have a one-page snapshot you can compare against the next company — and against this one a year from now. Keeping those snapshots in JustJot.ai, where you can search and link them as your watchlist grows, turns a one-time check into a research habit. The numbers only get useful when you write them down.