If you want to uncover hidden gems in the stock market—companies with serious growth potential that others might miss—one skill stands out above the rest: reading financial statements.

At first glance, financial statements might look like a jumble of numbers and accounting terms. But once you learn how to decode them, you’ll gain powerful insights into a company’s health, performance, and future potential.

Start with the income statement, also known as the profit and loss statement. This shows how much money a company is making (revenue), how much it’s spending (expenses), and what’s left over (net income). Look for consistent revenue growth, improving profit margins, and signs of cost control. A company that’s growing sales while keeping expenses in check is often on a solid upward path.

Next, explore the balance sheet, which gives you a snapshot of what the company owns (assets), owes (liabilities), and what’s left for shareholders (equity). This is where you can spot strong financial foundations—or red flags. Low debt levels, healthy cash reserves, and positive equity often signal a financially stable business.

Finally, don’t overlook the cash flow statement. Profits on paper don’t mean much if a company isn’t actually generating cash. Focus on free cash flow, which shows how much cash is left after operating expenses and capital investments. This can be a key indicator of a company’s ability to grow, pay dividends, or reinvest in its future.

Reading financial statements isn’t about being an accountant—it’s about seeing the full picture. The numbers tell a story. And if you can read that story better than the average investor, you’ll be ahead of the game when it comes to spotting explosive opportunities before they hit the spotlight.