How to Calculate Stock Consistency

by Contributing Writer ; Updated July 27, 2017

When looking at a stock, one of the things that you want to look at is the stock's consistency. Calculating it isn't so much a mathematical equation, but instead, an observation of how the stock goes. By following a series of steps, you can conclude whether or not the stock is a consistent one and worth your investment. Just because it isn't consistent, though, doesn't mean you don't invest. It means that your investment style is different.

Is a Stock Consistent

Step 1

Observe the volume of shares bought and sold for that specific day. Depending on what stock it is, it can range from only a couple hundred thousand shares to tens of millions of shares. The volume continues to go up throughout the day until the 4:30 p.m. bell closes the stock market.

Step 2

Compare the volume to the stock's average volume. If the day's volume is relatively close (being 100,000 off when there is a 45 million share volume is close), that means that the stock shows relative consistency overall. Each day, there are about the same number of shares bought and sold leading to the average volume.

Step 3

Look at graphs to observe how the stock's price fluctuates. What's important to look at is a stock's five- and ten-year history. If the stock fluctuates up and down, it has consistency because the economy goes through cycles. If the stock shows signs of incredible increases in price and then sudden drops in price, the consistency is not there.

Step 4

Consult the earnings reports of the company. If the stock has consistently been in the green and shown growth, the stock will, over time, continue to go up. This is one of the biggest factors of a stock's consistency. If a company is stable, its stock will be stable. If a company has good times and bad times, the stock will fluctuate up and down.

Step 5

Look for any legal problems. If the company has a clean record with legal issues, chances are, there won't be a problem that will cause the stock to drop suddenly. However, if the company has had issues with the law in the past, there is a chance it could happen again and this reduces the stock's consistency.