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Fundamental analysis

Defining fundamental analysis

Fundamental analysis is a method of valuation of stocks from the economic and financial analysis to predict the price movements of shares.

The most important information can be analyzed solid financial reporting and non-financial information, for example, estimates of the growth in demand for competing products, industrial comparisons, and the whole economy.

Basic Strategy

For the fundamentalists, the market share price tends to its intrinsic value. If the intrinsic value of the population is higher than the current market price, the investor buys the population, and whether the intrinsic value of the population was below the market price of the sale of shares to investors.

To start doing fundamentalists study of present and future health of the economy as a whole. In this step, you should try to determine the direction and level of interest rates.

After analyzing the economy as a whole, companies are considered individually. They must analyze the factors that make us a competitive advantage in its sector, such as management experience, the history of activity, growth potential, low-cost producer etc.

Some expressions of fundamental analysis

# 1 - EPS (earnings per share)

The proportion of company profits for each outstanding common share. The amount is calculated by dividing the number of shares of common shares. For example, a company that earned $ 10 million last year and 10 million shares to report earnings per share of $ 1

# 2 - P / E ratio (price / EPS)

Also known as “other income”, stock price divided by earnings per share. P / E ratio could either reported gains of recent years, or use analysts forecasts next year result. P / E gives investors an idea of how much they pay for the company to win.

# 3 - Dividend

Dividend is the sum of the benefits that the company pays for people who own shares in the company. If the company gets an advantage, some of this money often get them back into society, and urged retained earnings, and some of them be paid to shareholders as dividends.

# 4 - Value

The carrying value of the asset or group of assets, sometimes at the price they were originally purchased (original cost), in many cases equal to the purchase price.

# 5 - growth stocks

Analysts estimate the profitability of the company capital, net income and capital division of the company. To classify as an increase in stocks, analysts expect that at least 15% return on capital.

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