| Fundamental Analysis DefinitionFundamental | | | | I describe some stock fundamental analysis |
| analysis is a stock valuation method that uses | | | | expressions that are more important:#1- EPS: |
| financial and economic analysis to predict the | | | | (Earnings Per Share) The portion of a company's |
| movement of stock prices.The fundamental | | | | profit allocated to each outstanding share of |
| information that is analyzed can include a | | | | common stock. The amount is computed by |
| company's financial reports, and non-finanical | | | | dividing net earnings by the number of outstanding |
| information such as estimates of the growth of | | | | shares of common stock. For example, a |
| demand for competing products, industry | | | | corporation that earned $10 million last year and |
| comparisons, and economy-wide | | | | has 10 million shares outstanding would report |
| changes.Fundamentalists General StrategyTo a | | | | earnings per share of $1.#2- P/E Ratio: (Price/ |
| fundamentalist, the market price of a stock tends | | | | EPS)Also called its "earnings multiple", Price of a |
| to move towards its intrinsic value. If the intrinsic | | | | stock divided by its earnings per share. The P/E |
| value of a stock is above the current market | | | | ratio may either use the reported earnings from |
| price, the investor would purchase the stock, and | | | | the latest year or employ an analyst's forecast of |
| if the intrinsic value of a stock was below the | | | | next year's earnings. P/E gives investors an idea |
| market price, the investor would sell the stock.To | | | | of how much they are paying for a company's |
| start a fundamentalist makes an examination of | | | | earning power.An important notice here is that |
| the current and future overall health of the | | | | the P/E ratio is ultimately not an objective |
| economy as a whole. In this step you should | | | | measure; a high P/E ratio might show an |
| attempt to determine the direction and level of | | | | overvalued stock, or it might reflect a company |
| interest rates.After you analyzed the overall | | | | with high potential for growth.#3- Dividend |
| economy then analyze firms individually. You | | | | Dividend is an amount of the profits that a |
| should analyze factors that give the firm a | | | | company pays to people who own shares in the |
| competitive advantage in its sector such as | | | | company. When a company earns a profit, some |
| management experience, history of performance, | | | | of this money is typically reinvested in the |
| growth potential, low cost producer, and | | | | business and called retained earnings, and some of |
| etc.Fundamental Analysis ExpressionsFor beginning | | | | it can be paid to its shareholders as a dividend. |