Stock selection criterion

When people buy stocks, they are essentially buying a share of a company. To decide which stock to buy, they must look at certain criteria. This is called stock selection criterion. These criteria include things like a company's past performance, current and potential earnings, financial stability, and its potential for future growth. People also look for companies with good management teams, who have a good track record of making decisions that benefit the company and its shareholders. People also look for stocks with good price/earnings (P/E) ratios; P/E ratio is a measure of how much you are paying for a share of the company in relation to its earnings. Finally, people look for stocks that have good dividend yields, which refers to the portion of a company's profit given to its shareholders each year.