I get some version of the same DM every week. "Should I buy this stock?" Sometimes it's dressed up with a screenshot of a green candle. Sometimes it's just a ticker symbol and three fire emojis.
Honestly, it's the wrong question to be asking anyone else. Not because it's silly to wonder, it's a fair thing to want an answer to, but because it skips the part that actually matters. Before "should I buy this," you need to answer "do I even understand what I'd be buying." Most people skip straight past that and go with their gut, or worse, someone else's gut.
I used to do the same thing. I'd see a stock trending on someone's story, check if the chart looked like it was going up, and that was basically my due diligence. It took losing money on a couple of "sure thing" picks to figure out that wasn't research, it was just betting with better vocabulary.
So here's what I actually check now. Four numbers, maybe a minute, every single time, no exceptions, not even for the stocks that feel obvious.
1. P/E Ratio
This one gets thrown around a lot without anyone really explaining it, so let's start there. P/E stands for price-to-earnings, and it's basically asking: for every rupee of profit this company makes, how much am I paying to own a piece of it?
A P/E of 30 means you're paying 30x the company's current yearly profit for your share. You can think of it like a payback timer, if profits stayed exactly the same forever (they never do, but it's a useful mental shortcut).
Here's the part that trips people up, though. A P/E of 30 on its own tells you almost nothing. Is that expensive? Depends entirely on what else is around it. If every competitor in that same industry is trading at 35-40, a P/E of 30 is actually the cheap one in the room. Compare a young software company to a decades-old bank and the whole comparison falls apart, because the market just doesn't price those two types of businesses the same way. Growth industries get a premium. Slow, steady ones don't.
So the useful version of this check isn't "is the P/E high," it's "is the P/E high relative to its actual peers, and if it is, is there a real reason." Sometimes a high P/E is completely earned, a company genuinely growing faster than everyone else around it. Sometimes it's just a stock that's gotten ahead of itself on hype. Your job is figuring out which one you're looking at, not memorizing a magic number.
2. Revenue Growth (Last 3 Years)
Look at revenue over three years, not one quarter. A single good quarter can happen for a dozen boring reasons, a new product launch, a weirdly low comparison period, a one-off contract that won't repeat. Three years is harder to fake.
What you're actually trying to figure out here is whether this business is growing, or whether the stock price is growing while the business quietly stays the same size. These are not the same thing, even though they get treated like they are constantly.
I've watched this play out with stocks that were all over finance Instagram, price doubling in months, and when you actually pull up the revenue numbers, growth is sitting at like 5-6%. That gap is worth sitting with for a second. Sometimes there's a legitimate reason for it, the market pricing in something that hasn't shown up in the numbers yet. But a lot of the time it's just momentum and vibes running ahead of the actual business, and eventually the two have to meet back in the middle. Usually not gently.
3. Debt-to-Equity Ratio
This tells you how much of the company is built on borrowed money versus money that actually belongs to shareholders.
Rough guide, and I mean rough:
- Under 1.0 is generally on the safer side
- 1.0 to 2.0 is fairly normal for a lot of stable businesses
- Above 2.0 starts getting risky, unless the industry is just built that way
That last bit matters more than people give it credit for. Banks routinely sit at D/E ratios of 5, 8, sometimes way higher, and that's not a red flag, that's literally how banking works, they lend money for a living. Same story for utilities or real estate, businesses that need huge amounts of upfront capital. But if a random consumer brand or a software company is sitting on that same debt load, that's a different conversation, because they don't have the same kind of assets to fall back on if things go sideways.
The question I actually ask myself here is pretty simple: if this company had a genuinely bad year, would it survive comfortably, or would it be in real trouble? Lower debt usually means more room to make mistakes. That's not a flashy metric but it's saved me from a few bad decisions.
4. Promoter and Insider Holding
Last one's less about a formula and more about just watching what people do instead of what they say. Are the founders and top executives buying more of their own stock, or are they quietly selling and stepping back?
This one carries weight because insiders genuinely know more than the rest of us. They're looking at internal numbers and roadmaps months before any of that becomes public information. When you see insiders steadily increasing their own stake, that's not proof of anything, but it's a signal worth noticing, the people closest to the business are putting their own money where their mouth is.
Selling isn't automatically bad, to be clear, sometimes it's just an executive diversifying or paying for something in their own life, nothing sinister. But a pattern, multiple insiders selling around the same time, especially right before something disappointing gets announced, is one of the more reliable warning signs I've come across. It's honestly one of the only places in the market where you get to watch the most informed people vote with their actual wallets.
This Doesn't Guarantee Anything, And That's Kind of the Point
I want to be honest about something a lot of finance content quietly skips over: passing all four checks does not mean a stock can't drop.
I found this out the hard way recently. Ran a stock through this exact process, fundamentals looked fine, nothing screamed "stay away," and it still dropped 16% not long after. That's not the checklist failing me. That's just the difference between reducing risk and removing it completely, which isn't a thing that exists in the stock market no matter what anyone's Instagram bio claims.
No checklist protects you from a bad earnings call, a sudden macro shift, or news that genuinely nobody saw coming. What this actually does is filter out the obviously bad decisions, the ones made purely on hype or a chart that looked exciting for a week. Over a lot of decisions made this way, the odds tilt in your favor. On any single one, there's still no guarantee, and there never will be. That's not a flaw in the system, that's just what investing actually is.
The Short Version
Before buying anything, I check:
- P/E ratio, against competitors, not in a vacuum
- Revenue growth over 3 years, not one good quarter
- Debt-to-equity, and whether it fits the industry
- Insider buying vs. selling
All four are free and public, Screener.in and Yahoo Finance both have this stuff sitting right there. None of it requires a finance degree. The hard part was never the difficulty, it's just doing it every time, even for the stock that feels too exciting to bother checking.
That feeling, by the way, is usually exactly when checking matters most.
This article is for educational purposes only and isn't financial advice. Do your own research before making any investment decisions.