Fundamental Analysis
Understand how to analyse a company's financial health using fundamental analysis techniques.
What Is Fundamental Analysis?
Fundamental analysis is a method of evaluating a security by examining the underlying financial and economic factors. It looks at a company's revenue, earnings, future growth, return on equity, profit margins, and other data to determine its intrinsic value.
Key Financial Statements
The three core statements are the income statement (revenue and profit), the balance sheet (assets, liabilities, equity), and the cash flow statement (how cash moves in and out). Together, they paint a complete picture of a company's financial health.
Important Ratios
P/E ratio (price to earnings) tells you how much investors pay per pound of earnings. P/B ratio (price to book) compares market value to book value. Debt-to-equity measures leverage. ROE (return on equity) shows profitability relative to shareholders' equity.
Earnings & Revenue
Consistent revenue growth and healthy profit margins are positive signs. Look at year-over-year trends rather than single quarters. Compare against industry peers to understand relative performance.
Putting It Together
No single metric tells the full story. Combine multiple ratios, read annual reports, understand the industry landscape, and consider macroeconomic factors. Fundamental analysis is about building conviction based on evidence.
This is educational content only and does not constitute financial advice. Always do your own research before making investment decisions.