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Fundamental Analysis in summary

 

Fundamental analysis is a method of examining  economical and financial status of any company or organization so that it can be helpful in decision making whether to buy or not the share of the company.

it will help you to remove all the dilemma that you are having when you have to buy share of any company.

EPS = Earning per share meaning it is the monetary value of earning per share of common stock of a company .the better it is , the good it is so the company having good EPS is considered better for investment in share market.

BOOK value = net worth share =(ASSET - LIABILITIES )/TOTAL SHARE OF COMPANY 

book value can indicate whether a stock is under- or overpriced.

When a company sells stock, the selling price minus the book value is the capital gain or loss from the investment.you will get amount as equal to book value of a company whether or not the company get profit and loss.

Price to book value (PBV)Ration = it must be below 3 to consider company is good for investment.

Return on equity (ROE ) = greater the ROE , better for investment.

Dividend history = it should be look whether it is constant or not , good bonus percent is given or not .

some more information about the management team , business plan should be known to decide whether to invest or not in the company.

now after finding some company as selected from above factors considered , we need to find among them the good one for us . for this one way is to look about P/E ratio:





if any company's stock has P/E value less than 20 then such stock are considered under valued stock and we can do investment in such company.

and another index to know this is Graham Number :



so while buying don't buy by giving more than 1.5 of BV and 15 times of EPS .so the fair price to buy is SQUARE ROOT OF (22.5 *book value *EPS )




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