Synopsis on Fundamental Analysis of a Company

Posted by Gauri Satpute on January 17th, 2019

Fundamental analysis of stocks is founded on two parameters of data; first, private information (Only limited resources have access to sensitive information). The second parameter being the historical data, it is the information that is archived publicly (this involves declarations made by annual reports released and the board in the media)

Fundamental analysis of a company involves evaluation and finding out whether the company revenues are escalating. It also assesses whether the company is capable of paying back debts. What is the standoff of the company with respect to its competitors? Will it be able to sustain the competitors? More importantly, Is the company making a profit, and finally is it worth making stock investments with the company. Fundamental analysis of stocks becomes the core of investing in a business.

Yes, generating earnings is important. Unfortunately, the revenues can’t speak for themselves. One cannot identify the value of a stock based on earnings. There needs to be a yardstick where the stock can be valued. Hence there are some tools that are present in the form of fundamental analysis tool to measure the fundamental analysis of stocks.

Some of the tool focus on the earning, growth and the value of the market. Few of the major factors that determine the true worth of the company or stock are as follows:

Price to Earnings Ratio (P/E): This ratio compares the present sales price of a company's stock to its per-share earnings.

Earnings Per Share (EPS): Earnings per share is calculated as net income fewer dividends on preferred stock divided by the number of outstanding shares.

Projected Earnings Growth (PEG): This parameter approximates and anticipates the one-year earnings growth rate of the stock.

Dividend Payout Ratio: It compares dividends that are paid out to the stockholders to the company's total net income. The accountability is for retained earnings. The income is not paid out, but rather retained for potential growth.

Return on Equity: Here the calculation is carried out by dividing the company's net income by shareholders' equity to find its return on equity. It is expressed as the company's return on net worth.

One thing must be noted that the tools that are mentioned above are simply to carry out an assessment of how the company is doing. It does not mean that using these tools will change the current status quo of business. It is rather a medium to facilitate a change. To get your company in a good shape and get the detailed fundamental of stocks done, you need a good professional financial institute.

JMFL is one such institute that caters to analyzing, examining the key ratios of a business to determine the financial status of a company. It can also give you an idea of the true worth of the stock. The professionals at JMFL takes several factors into account, including revenue, asset management, and the production of a business as well as interest rate to arrive at a conclusion. For more information on the company, do visit the website and get introduced to a wide range of services being presented to you.