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