Fundamental Analysis of Stocks
Fundamental Analysis of Stocks
Fundamental Analysis of Stocks
Quantitative Analysis
1. P & L Statement of xyz share on Tickertape
It consists of
The revenue of the company for a certain time period (quarterly or
yearly)
Tax and depreciation
The EPS number
The expenses incurred to generate the revenues
Main Paramenters
revenue, Profit Before Interest and Tax (PBIT), and net income.
net profit for the last 5-10 yrs and operating profit to have a deeper
understanding of the P&L statement
5. Financial Ratios
The higher the PAT margin, the better the profitability of a company. It is
referred to as Net Profit Margin (NPM). It should be compared with the
previous years’ trends or competitors to understand more deeply.
If a company has more debt, its RoE would be higher than its ROA.
Leverages Ratios
Operating Ratios
The higher the working capital turnover ratio of a company, the better sales it
can generate in comparison with the funds they have used to execute the
sales.
To determine if a stock is undervalued or overvalued, the P/E ratio of that
stock is compared with other stocks of the same industry and/or with the
sector P/E. A high P/E ratio could mean that the stock price is relatively
higher than its earnings and possibly overvalued. In contrast, a low P/E ratio
might indicate the stock’s price is low relative to earnings and perhaps
undervalued.
P/s Ratio
he higher the P/S ratio, the higher the valuation of the company. Conversely,
a low ratio indicates the stock is undervalued.