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How can we analysis stock before investing? We all want to invest in safe and profitable stock but how can we analysis this? Today I'll discuss about it.
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Usually we depend on the recommendation of stock analysts, word of mouth and media coverage to make investment decisions. The more we invest, the more important it becomes to conduct our own fundamental analysis on stocks before investing in them. To invest confidently and prudently requires a thorough stock analysis and broad understanding of the industry you are choosing to put money in.
Stock investment analysis is done on the basis of fundamental and technical analysis.
Today I'll discuss about fundamentals analysis.
How to check a fundamentals of a company? We can check some variables like conditions of the economy, financial conditions and a company's management proficiency. Compare with the stock price in present, like is this stock undervalued or whether it is overvalued.
Market cap is the total market value of all of a company's outstanding shares. In which we can check whether company is big or small.
Large-cap companies have a market cap of rs 20,000 crore or more. Meanwhile, the market cap of mid cap companies is between rs. 5,000 crore and less than rs 20,000 crore. Small cap companies have a market cap of below rs 5,000 crore.
The original value of company's stock as written in its books of accounts and its share certificate. Also known as per value, it is first when the stock is first issued.
Share market analysis is a numbers game. If you know which company you want to invest in - the financial statements of the company is the most important. These statements are publicly available. In which you can read company's balance sheet, income statement and cash flow summaries. We can analysis company's profit, sales , cash flow, reserve in present and compared it with past few years, we can analysis is company growing? Is company doing good from past years. If you notice any abnormalities changes, check why it is ( may be due strike or any epidemic)
By analysis this we can evaluate the future earning potential of the company.
A comparative analysis of the company's performance against its competitors or other companies In the same industry provides further insight on how well the company is performing relative to industry standards.
Dividend yield persentage is the amount of money a company pays its shareholder fow owning a share of its stock divided by its current stock price. Yields from 2% to 6% are generally considered to be a good dividend yield.
Earning per share (EPS) is a company's net profit divided by the number of its common outstanding share . It indicates how much money a company makes for each share of its stock.
There is not fix answer for what is a good EPS. But it is considered the higher the EPS Number, the more profitable the company.
Debt to equity is the persentage of the total liabilities of a company (debt) to its shareholders equity. A higher debt to equity means the company is using more debt fund than the equity fund and the lower debt to equity means more equity than debt funds.
Generally, a good debt-to-equity ratio is anything lower than 1.0 . A ratio of 2.0 or higher is usually considered risky.
Return on equity (ROE) is a measure of financial performance , calculated by divided net income by shareholders equity.
A return on equity of 15% to 20% is usually considered good. At 5% the ratio would be considered low.
Price to earing ratio is the ratio of a company's share price to its earning per share. P/E ratio is used to determine whether a company is overvalued or undervalued.
A good P/E ratio is lower than the average P/E ratio, which is between 20-25. When looking at the P/E ratio alone, the lower it is the better.
Price to book ratio is a ratio of a company 's share price to its book value. Any value under 1.0 is considered a good a P/B ratio.
The amount of money that's a company shareholder would earn if it is liquited and has pay off all liabilities.
So these are fundamental analysis, we can study a stock through these variables. Alongwith these fundamentals letest news about company is most important.
Hope you find this post useful , what do you think about analysis any stock? Let me know below in the comment section.
@mysteriousroad