Earnings

• The best indicator of stability is earnings--a stable business will produce consistent earnings year after year, in almost any market. A cyclical business's earnings will vary from year to year.
  
  

Balance Sheet

• A well capitalized, conservatively managed business stands a better chance of weathering a downturn. A business with a lot of debt or generally risky finances may have problems in a downturn, even if it belongs to a fairly stable sector.
  
  

Industry/Group

• Companies in certain industries are more likely to be consistent earners and producers. Businesses that produce and sell consumer staples such as food and basic household items are inherently more stable than businesses that produce and sell major appliances or luxury clothing. In a bad year, consumers may hold off on a major purchase such as new living-room furniture but they still have to buy food and cleaning supplies. They may eat out less but the aggregate demand for meat is likely to remain the same.
  
  

Chart

• Charts reflect what people do, not what they say or think. An investor may have a particular opinion of a business, but if a stock chart is pretty even and stable, without major ups and downs, in the end it reflects the stability of the underlying business. One look at a long-term (weekly or monthly) chart that looks like a steady or straight line may tell you more about the stability of a business than an in-depth analysis of the fundamentals.
  
  

Stability vs. Growth

• Stable businesses are often described as conservative or defensive in that they do not have steep ups and downs so their stocks are perceived as reliable investments. However, the purpose of investing is to make money, and a stable business with a stable stock price may not grow enough to justify investing in it rather than in a fast growing business that may experience periodic setbacks.