Fundamental Analysis
Fundamental Analysis
Fundamental analysis is the study of a company’s financial strength, based on historical data; sector and industry position; management; dividend history; capitalization; and potential for future growth. It is a stock valuation method that uses financial and economic analysis to predict the movement of stock prices. The analysis attempts to find the intrinsic value of a security that helps investors to make decisions.
The fundamental information that is analyzed can include a company's financial reports, and non-financial information such as estimates of the growth of demand for products sold by the company, industry comparisons, and economy-wide changes, changes in government policies etc.
The various steps involved in the fundamental analysis are: 1. Macroeconomic analysis, which involves considering the overall health of the economy and its future. 2. Industry analysis, which involves the analysis of the industry in which the company is operating. 3. Situational analysis of the company, studying their business model, management, products and services, its current position, its future, etc. 4. Financial analysis of the company, which involves analyzing the financial statements like balance sheets, income statements, cash flows and ratios. 5. Valuation, which attempts to find the intrinsic value of the securities of the company.
The approach to fundamental analysis is often referred to as E-I-C Approach. The E-I-C denotes the three parts of the fundamental analysis. The three distinctive parts of fundamental analysis are: 1. Economic Analysis 2. Industry Analysis and 3. Company Analysis
ECONOMIC ANALYSIS:
Economic analysis is the analysis of forces operating the overall economy a country. It is a process whereby strengths and weaknesses of an economy are analyzed and is important in order to understand exact condition of an economy. The various factors considered are:
The Economic
Fundamental analysis is the study of a company’s financial strength, based on historical data; sector and industry position; management; dividend history; capitalization; and potential for future growth. It is a stock valuation method that uses financial and economic analysis to predict the movement of stock prices. The analysis attempts to find the intrinsic value of a security that helps investors to make decisions.
The fundamental information that is analyzed can include a company's financial reports, and non-financial information such as estimates of the growth of demand for products sold by the company, industry comparisons, and economy-wide changes, changes in government policies etc.
The various steps involved in the fundamental analysis are: 1. Macroeconomic analysis, which involves considering the overall health of the economy and its future. 2. Industry analysis, which involves the analysis of the industry in which the company is operating. 3. Situational analysis of the company, studying their business model, management, products and services, its current position, its future, etc. 4. Financial analysis of the company, which involves analyzing the financial statements like balance sheets, income statements, cash flows and ratios. 5. Valuation, which attempts to find the intrinsic value of the securities of the company.
The approach to fundamental analysis is often referred to as E-I-C Approach. The E-I-C denotes the three parts of the fundamental analysis. The three distinctive parts of fundamental analysis are: 1. Economic Analysis 2. Industry Analysis and 3. Company Analysis
ECONOMIC ANALYSIS:
Economic analysis is the analysis of forces operating the overall economy a country. It is a process whereby strengths and weaknesses of an economy are analyzed and is important in order to understand exact condition of an economy. The various factors considered are:
The Economic