Fundamental analysis helps to determine the prices of the stock. It is also known as stock valuation method. But remember that it is not necessary that the price determine by fundamental analysis is always right. It helps to determine the prices of a company (in a market). It helps to determine whether the company is running in loss or it is earning profits. It includes the financial and non - financial information of the company. It help you to decide whether to invest or not in a particular company. It gives an idea whether a particular company is running in loss or it is running in profits. It gives a brief idea about a particular company.
Fundamentalists' general strategies
Fundamental analysis help fundamentalist to move towards intrinsic value of a company. If the current value is lower that intrinsic value the investor would buy the stock, if the current value is higher than intrinsic value the investor would not buy that particular stock. Before investing in the particular company the fundamentalist would examine the past and the present history of that company. That would give you an idea whether to invest or not in a particular company
Fundamental analysis expression
One should have an idea about fundamental analysis before starting. The following are the some important analysis expression that one should keep in mind
1. Earning per share
You should try to find how much profit does the company allocate to its outstanding share? The amount is calculated by dividing net profit with the number of outstanding share.
2. Price/ Eps ratio
It is also known as "earning multiple". Price is divided by the profits earned on each share. It helps to get information about companies past profit and it also provides the information regarding the company's next year profits. It would give you an idea that how much profit does the company gives to its investors.
3. Dividend
Dividend is the amount of profit that the company gives to its investors. Some part of the profit is reivestved in the business while the remaining profit is distributed among the investors of that particular company.
Before investing in any company investors should keep all this points in mind.