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A
Presentation
on
STOCK MARKET: FUNDAMENTAL ANALYSIS

Submitted to:-
Dr. Sultan Singh
(Professor)
MMIM

Under the guidance of:- Submitted by:-

Dr. Priyanka Salgotra Tushar
(Professor) MBA Sem(III) (B)
MMIM 12237116
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Introduction to Stock
Market
• The stock market serves as a vital
platform for buying and selling shares,
reflecting the company's financial
health through fundamental analysis

Overview of Stock Market

• Financial marketplace for securities

• Facilitates trading of shares
• Indicator of economic health
• Supports capital formation
• Provides investment opportunities

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Introduction to
Fundamental Analysis
Overview of Fundamental Analysis
Fundamental analysis focuses on
evaluating a company's financial health
and performance. It involves studying
financial statements to determine
intrinsic value and future growth
potential.

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Importance of
Fundamental Analysis
Evaluates company financials
Identifies investment value
Assesses long-term performance
Informs risk management
Guides investment decisions

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 REVIEW OF LITERATURE
The origin of Fundamental analysis for the share price valuation can be dated back to Yu-Hon Lui and David Mole (1998) reports on the use by
foreign exchange dealers in Hong Kong of fundamental and technical analyses to form their forecasts of exchange rate movements.

Thomas Ober lechner (2001) presents the findings of a questionnaire and an interview survey on the perceived importance of Technical and
Fundamental analysis among foreign exchange traders and financial journalists in Frankfurt, London, Vienna and Zurich. Foreign Exchange
traders confirm that, out of both the forecasting approaches, technical analysis is more prominent than the other.

Doron Nissim and Stephen H. Penman (2001), this research work envisages on Financial Statement analysis and identifies that this analysis has
traditionally been seen as part of the Fundamental analysis required for equity valuation. This paper outlines a financial statement analysis for
use in equity valuation.

Sanjay Sehgal and Meenakshi Gupta (2005) presents the survey which aims at providing insights about the way technical traders operate in the
financial market and the trading strategies that they adopt. The survey covered institutional and individual technical traders with a long and
active trading record for the Indian market. In this study also it is observed that the sample respondents tend to use Technical analysis along
with Fundamental analysis for security selection.

Jenni L., Bett man, Stephen. J. Sault, Emma J. Schultz (2008), proposes an equity valuation model integrating Fundamental and Technical
analysis, they tend to recognize their potential as complements rather than as substitutes. Testing confirms the complimentary nature of
Fundamental and Technical analysis by showing that in spite of each performing in isolation models integrating both have superior explanatory
power.
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RESEARCH PROBLEM

1. Effectiveness of Fundamental Analysis in Predicting Stock Prices

2. Sector-Specific Differences in Fundamental Analysis : Assessing whether the application of fundamental analysis
differs significantly across sectors and how these differences influence investment outcomes.

3. Role of Financial Statements in Decision-Making

4. Long-Term vs. Short-Term Perspectives in Fundamental Analysis: Comparing the effectiveness of fundamental
analysis for long-term investing versus short-term trading strategies.

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OBJECTIVES

1. Valuation of Securities

2. Investment Decision Support

3. Long-Term Investment Strategy

4. Identification of Trends

5. Support for Portfolio Diversification

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 Research Methodology
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Research design Descriptive

Nature of study Descriptive

(Secondary Data)

Data Collection Secondary Data

(Screener.In , NSE )

Duration 2 months

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Important Ratios
P/E Ratio
Dividend Yield
Return on Capital employed
Return on Equity
Debt Equity
Intrinsic Value
Sales Growth
Asset Turnover
Price to book value
Return on Assets
Interest Coverage
Debt to Profit

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1. Price-to-Earnings (P/E) Ratio

P/E:ratio Price Per share / earning per share 4.52

Definition: Measures a company's current share price relative to its earnings per share (EPS).
•Significance: Indicates how much investors are willing to pay for each rupee of earnings. A high P/E may
suggest overvaluation or growth expectations, while a low P/E may indicate undervaluation or potential issues.

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2.Dividend Yield
•Definition: The annual dividend payment divided by the stock's current price.
•Significance: Reflects the return on investment for shareholders in terms of cash dividends. It’s particularly important for
income-focused investors.

3. Return on Capital Employed (ROCE)

•Definition: Measures a company's profitability and the efficiency with which it uses capital
•Significance: Indicates how well a company generates profits from its capital. Higher ROCE suggests effective capital use.

4. Return on Equity (ROE)

•Definition: Net income divided by shareholder equity.
•Significance: Measures how effectively management is using equity financing to generate profits. A high ROE indicates
efficient use of equity capital.

5. Debt-to-Equity Ratio
•Definition: Total debt divided by total equity.
•Significance: Indicates the proportion of company financing that comes from debt versus equity. A high ratio suggests higher
financial risk, while a lower ratio indicates a more conservative capital structure.

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6. Sales Growth
•Definition: The percentage increase in sales over a specific period.
•Significance: Indicates a company's ability to expand its revenue base. Consistent sales growth is often a positive sign for future
profitability.

7. Asset Turnover
•Definition: Revenue divided by total assets.
•Significance: Measures how efficiently a company uses its assets to generate sales. Higher turnover indicates better efficiency.

8. Price-to-Book (P/B) Ratio

•Definition: Market price per share divided by book value per share.
•Significance: Compares a company’s market value to its book value, helping investors assess valuation. A P/B ratio less than 1
may indicate undervaluation.

9. Return on Assets (ROA)

•Definition: Net income divided by total assets.
•Significance: Measures how effectively a company uses its assets to generate profit. Higher ROA indicates efficient
management.

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Ratio Analysis
This table summarizes ratio analysis . Understanding these ratios is
crucial for evaluating company performance. They provide insights into
value, profitability, and financial stability.

Metric Description Importance

P/E Ratio Price-to-Earnings ratio Indicates company valuation

Measures profitability against shareholder

ROE Return on Equity
equity

Debt-to-Equity Financial leverage indicator Assess company risk

Current Ratio Liquidity measure Indicates ability to pay short-term obligations

Gross Margin Revenue after COGS Shows efficiency in production

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Findings Of Analysis

50% 30% 20%

Positive Trends Neutral Trends Negative Trends

Positive market conditions can Some analyses lead to stable Negative analysis conclusions can
arise from sound analysis, leading market conditions where stock sway market sentiments, often
to increased investor confidence. prices maintain equilibrium. resulting in declines.

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 Success Factors

KEY INDICATORS MARKET TIMING RESEARCH AND ANALYSIS

Identifying strong companies with solid While fundamental analysis value long- Conducting thorough research enables
fundamentals is crucial for success in term growth, timing market entry and investors to recognize undervalued
both strategies. Understanding exit can significantly impact overall assets. Knowledge of industry trends
financial health boosts investor returns and investment success. enhances decision-making processes.
confidence.
 FINAL THOUGHTS ON INVESTING

Conclusion & Ultimately, fundamental analysis aims to give you a

number, a value, for the company you can use when

Insights buying, holding, or selling stocks. It requires a

comprehensive understanding of financial statements
and a strategic view of how external factors could impact
the company's future earnings and market position.