Fundamental Analysis
Fundamental Analysis
Fundamental Analysis
The
process of gathering information, organising it into a logical framework and then using it to determine the underlying value of a share.
Intrinsic Value
The
underlying or inherent value of a stock as determined through fundamental analysis.
The
entire concept of stock valuation is based on the belief that all securities possess an intrinsic value that their current market or trading value must approach over time.
Intrinsic Value Depends On:
Estimates
of the share’s future cash-
flows
The discount rate used to translate these future cash flows into a present value The amount of risk embedded in achieving the forecasted level of performance Fundamental Analysis
Intended
to help investors formulate expectations about the future performance of the company and its shares By
analysing its past performance and current situation to determine how well it is situated to meet future challenges
Fundamental Data Defined
We will define ‘fundamental’ data to include ;
company financial reports (and their analysis), earnings forecasts, directors dealings, announcements, broker’s research / tips,
and attempt to answer the following questions.
Fundamental Questions 1 of 3
Is the firm financially sound
This will involve checking the company’s accounts, to establish
profitability
liquidity
gearing
fixed asset values
sufficient resources to sustain profitability and cope with setbacks
Fundamental Questions 2 of 3
Does
the firm have anything going for it ?
A
really impressive product
superior marketing
skilled management
built -in growth
Based
on all of the above - what profits will the firm make this year ?
Fundamental Questions 3 of 3
Do I have enough information to estimate the picture into the future too ?
Based on my profits forecast, what will earnings per share (EPS) be ?
Based on EPS, what is the price/earnings ratio (P/E) ?
Also
Fundamental Analysis
The
process of gathering information, organising it into a logical framework and then using it to determine the underlying value of a share.
Intrinsic Value
The
underlying or inherent value of a stock as determined through fundamental analysis.
The
entire concept of stock valuation is based on the belief that all securities possess an intrinsic value that their current market or trading value must approach over time.
Intrinsic Value Depends On:
Estimates
of the share’s future cash-
flows
The discount rate used to translate these future cash flows into a present value The amount of risk embedded in achieving the forecasted level of performance Fundamental Analysis
Intended
to help investors formulate expectations about the future performance of the company and its shares By
analysing its past performance and current situation to determine how well it is situated to meet future challenges
Fundamental Data Defined
We will define ‘fundamental’ data to include ;
company financial reports (and their analysis), earnings forecasts, directors dealings, announcements, broker’s research / tips,
and attempt to answer the following questions.
Fundamental Questions 1 of 3
Is the firm financially sound
This will involve checking the company’s accounts, to establish
profitability
liquidity
gearing
fixed asset values
sufficient resources to sustain profitability and cope with setbacks
Fundamental Questions 2 of 3
Does
the firm have anything going for it ?
A
really impressive product
superior marketing
skilled management
built -in growth
Based
on all of the above - what profits will the firm make this year ?
Fundamental Questions 3 of 3
Do I have enough information to estimate the picture into the future too ?
Based on my profits forecast, what will earnings per share (EPS) be ?
Based on EPS, what is the price/earnings ratio (P/E) ?
Also