Stock Fundamental Analysis Basics

Fundamental Analysis DefinitionFundamentalI describe some stock fundamental analysis
analysis is a stock valuation method that usesexpressions 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 fundamentalprofit allocated to each outstanding share of
information that is analyzed can include acommon stock. The amount is computed by
company's financial reports, and non-finanicaldividing net earnings by the number of outstanding
information such as estimates of the growth ofshares of common stock. For example, a
demand for competing products, industrycorporation that earned $10 million last year and
comparisons, and economy-widehas 10 million shares outstanding would report
changes.Fundamentalists General StrategyTo aearnings per share of $1.#2- P/E Ratio: (Price/
fundamentalist, the market price of a stock tendsEPS)Also called its "earnings multiple", Price of a
to move towards its intrinsic value. If the intrinsicstock divided by its earnings per share. The P/E
value of a stock is above the current marketratio may either use the reported earnings from
price, the investor would purchase the stock, andthe latest year or employ an analyst's forecast of
if the intrinsic value of a stock was below thenext year's earnings. P/E gives investors an idea
market price, the investor would sell the stock.Toof how much they are paying for a company's
start a fundamentalist makes an examination ofearning power.An important notice here is that
the current and future overall health of thethe P/E ratio is ultimately not an objective
economy as a whole. In this step you shouldmeasure; a high P/E ratio might show an
attempt to determine the direction and level ofovervalued stock, or it might reflect a company
interest rates.After you analyzed the overallwith high potential for growth.#3- Dividend
economy then analyze firms individually. YouDividend is an amount of the profits that a
should analyze factors that give the firm acompany pays to people who own shares in the
competitive advantage in its sector such ascompany. 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, andbusiness and called retained earnings, and some of
etc.Fundamental Analysis ExpressionsFor beginningit can be paid to its shareholders as a dividend.