is the company still run by its founders or has the board shuffled in a lot of new faces younger companies tend to be founder led research the bios of management to find out their level of expertise and experience bio information can be found on the company s website 
whether founders and executives hold a high proportion of shares and whether they have been selling shares recently is a significant factor in due diligence high ownership by top managers is a plus and low ownership is a red flag shareholders tend to be best served when those running the company have a vested interest in stock performance the p e ratio gives a sense of the expectations that investors have for the stock s near term performance the company s consolidated balance sheet will show its assets and liabilities as well as how much cash is available check the company s level of debt and how it compares to others in the industry debt is not necessarily a bad thing depending on the company s business model and industry but make sure those debts are highly rated by the rating agencies some companies and whole industries like oil and gas are very capital intensive while others require few fixed assets and capital investment determine the debt to equity ratio to see how much positive equity the company has typically the more cash a company generates the better an investment it s likely to be because the company can meet its debts and still grow if the figures for total assets total liabilities and stockholders equity change substantially from one year to the next try to figure out why reading the footnotes that accompany the financial statements and the management s discussion in the quarterly or annual reports can shed light on what s really happening in a company the firm could be preparing for a new product launch accumulating retained earnings or in a state of financial decline investors should research both the short term and long term price movements of the stock and whether the stock has been volatile or steady compare the profits generated historically and determine how it correlates with the price movement keep in mind that past performance does not guarantee future price movements if you re a retiree looking for dividends for example you might not want a volatile stock price stocks that are continuously volatile tend to have short term shareholders which can add extra risk for certain investors investors should know how many shares outstanding the company has and how that number relates to the competition is the company planning on issuing more shares if so the stock price might take a hit investors should find out what the consensus of wall street analysts is for earnings growth revenue and profit estimates for the next two to three years investors should also look for discussions of long term trends affecting the industry and company specific news about partnerships joint ventures intellectual property and new products or services be sure to understand both the industry wide risks and company specific risks are there outstanding legal or regulatory matters is there unsteady management investors should play devil s advocate at all times picturing worst case scenarios and their potential outcomes on the stock if a new product fails or a competitor brings a new and better product forward how would this affect the company how would a jump in interest rates affect the company once you ve completed the steps outlined above you ll have a better sense of the company s performance and how it stacks up to the competition you will be better informed to make a sound decision due diligence basics for startup investments