Fundamental Analisys (I)

Fundamental Analysis looks into the basic financial condition of the company or business. Usually, all the information we need to do the analysis are publicly available, because all the public companies are required to report their operation and financial condition to the market/investors.

There are different of aspects that we can look into, but there are few basic things that we can start to look into:

1. Earning,

• Arguably one of the most important aspect of any business. Stock investors are focus on the future earning. However, since future is difficult to predict, they use the historical earning as a gauge to predict the future.
• Although looking at earning figures seems to be relatively easy, unfortunately there are few of different ways to look at a company's earning. This include the time of earning and the quality of earning. We will go into more detail of this earning in another post.

2. R/E Ratio

• P/E Ratio is calculated by dividing a stock price by its per share earning for a given years. Usually, we calculated the P/E based on a company expected earning ( this is what is called Forward P/E).
• It is a good place to start to determine the value of a stock, and it certainly most helpful to compare it against other P/E Ratios
• We might first compare it with the company's P/E ratio in the past, how high and how low it could go. Other than that we can also compare it with other similar company in the industry or the stock market index.
• Just because a stock has a relatively low P/E ratio, does not always mean it's worth purchasing. Others maybe aware of a looming problems and discounted the stock price accordingly. It can either good or a bad sign, always do your reasearch first.

3. to be continued...