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The Complete Idiot's Guide to Stock Investing Fast-Track by Ken Little

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Size Matters in Stocks

One of the ways you analyze stocks is to compare key metrics to other stocks of the same size and industry sector. I discuss industrial sectors in the next section of this chapter. Company size is important for two reasons:

Companies of different sizes behave differently. A company with sales in the tens of billions of dollars and with thousands of employees will not respond to market conditions the same way as a company with 100 employees and a couple of million dollars in sales. If you want to know if the large company is performing well, you compare it to companies of roughly the same size.

Large companies are less risky. Small companies have a high mortality rate, which makes them more risky than large companies. ...

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