Fundamental Analysis of a Stock

Fundamental Analysis is the way of analysis of security based on their internal and actual performance of Company unlike Technical Analysis in which just the movement of prices is studied, without considering the fundamentals of the company




Fundamental analysis of a security is the study of Balance sheets, Profit or Loss account, assets and liabilities, sales income, other income, interest payment and etc.


Based on this an Analyst comes a conclusion about the future of the stock or the Company.


Some of the main value they see are PE ratio, EPS and Book value.


PE ratio is the ratio between Price of the Stock at the Market to the earning of the stock per share. Higher it is, the stock price is highly valued. If it is less, then the stock price is priced low.


EPS denotes Earnings per Share. It is the ratio of profits made for the year to the number of shares of the company. If the value is high, it means the earnings are high for the company and if it is low, then the earnings of the company is low.


Growing sales figure or slowing sales figure would influence the future performance of a company.


An analyst also see the performance of the sector at which a particular belongs to. They analyze the performance of the company with the sector’s performance. And also they see the future for the that sector.


Various factors like this influence the movement of the price of a particular stock. Study of this factors is Fundamental Analysis.