Guide to stock selection

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At the Frankfurt Stock Exchange you can invest your money in around 1,000 domestic and 11,000 international shares; so many investment opportunities make your choice so difficult. But just a few basic tips and figures will help you move confidently on the trading floor and choose the right stock. 

Initially, you can rely on well-known companies 

Since you are buying a share in a company, you should inform yourself as intensively as possible about the company in advance. Familiarize yourself with the company: Where does the company have its headquarters? What does it do, what is the purpose of the company, what does the business model look like? Newcomers to the stock market should concentrate on companies they know and understand. 


The sector in which the company operates also provides important guidance. The more you are familiar with an industry, the more well-founded your selection of a company will be. For example, many investors only deal with shares of companies that operate in the same sector as themselves. But also keep an eye on future prospects. 

Business activity: Pay attention to the company's products. 

We recommend that you take a close look at the product or service offering of the company from which you wish to purchase shares. Are the products innovative and competitive goods or services? Information on trends and technical innovations can be found online or in newspapers and magazines. These help you to assess whether the respective products can occupy a successful market position. You as an investor should be convinced of the marketability of the products. Trust is a basic prerequisite for the success of an investment. 

Facts and figures for a quick overview 

Another important criterion is the company's key figures. With a little common sense, you can understand the basic key figures of company valuation even without business management expertise. An important parameter is the price-earnings ratio (P/E ratio). It tells you how high a company is valued - measured in terms of profit. The historical P/E ratio of DAX shares averages 15. A P/E ratio of 15 means that companies are valued at 15 times their annual profit. These companies therefore need 15 years to earn their own value through profits. Growth companies, in whose business models investors have high expectations, but who do not make profits at the moment, usually have a comparatively high PER. 

A further useful key figure for stock valuation is the dividend yield, which is the dividend payment per share divided by the current price times 100. It indicates how many percent yield a share earns through the dividend payment. Since share prices vary widely, the dividend yield is most meaningful if the expected dividend is used as a basis. Cash flow, defined as the balance of payments and disbursements within a certain period of time, the book value per share or the return on equity, is also taken into account. 


These company sizes are usually visible to everyone, either in the financial section of daily newspapers or in the numerous online financial portals. Extensive characteristic numbers to the enterprises find you for example on boerse-frankfurt.de The enterprises make data available in addition likewise, for example in their annual reports and business prognoses. These data can often be viewed on the company websites. 

After you have now informed yourselves thoroughly, you are well prepared for your first investment decision. To do this, you select one or more companies that you find interesting and first observe their share performance. How does that work? You can put on yourselves for example comfortably and free of charge a personal www.boerse-frankfurt.de/watchlist on boerse-frankfurt.de and place interesting values into a list. There you can find all shares tradable on the Frankfurt Stock Exchange quickly and easily - and you can keep an eye on the securities and information relevant to you at all times. 

Analysts: Useful information sources for stock selection 

The central task of equity analysts is the systematic valuation of companies. Analysts usually specialize in individual companies and industries. Their results, called stock research, are made available to professional investors. These research reports are not always freely accessible, but the summary is usually published through news agencies, usually in the form of a recommendation - underweight (sell), hold or overweight (buy) with price target. 

The most important tips for your search for the right stock:

  • Gather information about the companies whose shares you want to trade
  • Inform yourself about the branch and the product range of the companies
  • Consult company key figures (P/E, cash flow, book value, dividend yield, return on equity etc.)
  • Create a personal watchlist of your shares on boerse-frankfurt.de
  • Do it like the professionals: concentrate on up to a maximum of five shares