๐จ๐ป๐ฑ๐ฒ๐ฟ๐๐๐ฎ๐ป๐ฑ๐ถ๐ป๐ด ๐ฆ๐๐ผ๐ฐ๐ธ ๐๐๐ป๐ฑ๐ฎ๐บ๐ฒ๐ป๐๐ฎ๐น๐: ๐ฌ๐ผ๐๐ฟ ๐ฃ๐ฎ๐๐ต ๐๐ผ ๐ฆ๐๐ฐ๐ฐ๐ฒ๐๐ ๐ฎ๐ ๐ฎ๐ป ๐๐ป๐ฎ๐น๐๐๐
Stock fundamentals are key metrics and info that help investors and analysts determine the intrinsic value of a company's stock. Students aspiring for #investmentbanking and #globalmarkets roles must know these basics to get insights into the firm's financial health, performance, and prospects even before complex financial modeling:
๐๐ผ๐บ๐บ๐ผ๐ป ๐ฆ๐๐ผ๐ฐ๐ธ ๐๐๐ป๐ฑ๐ฎ๐บ๐ฒ๐ป๐๐ฎ๐น๐:
➡️Earnings and Revenue: Crucial indicators of its financial performance.
➡️Dividends: Payments made to shareholders from company profits. These are similar to regular payouts, like interest in a savings account, offered by companies from their profits.
➡️Cash Flow: Cash flow represents the amount of money flowing in and out of a company. A positive cash flow indicates that a company is generating more cash than it is spending. This is essential for the firm’s operational and investment activities.
➡️Price-to-Earnings (P/E) Ratio: A valuation ratio that compares the current stock price to earnings per share. It helps assess whether a stock is overvalued or undervalued. These ratios gauge a company’s share price relative to its earnings per share. For instance, a P/E ratio of 20 indicates that the investors pay $20 for each $1 of earnings. One can find the P/E ratio by comparing the latest market price with the cumulative earnings of the previous 4 quarters.
➡️Price-to-Book (P/B) Ratio: It compares a stock's market value to its book value, indicating whether a stock is under or overvalued.
➡️Debt Levels: Understanding a company's debt and how it's managed is crucial.
➡️Balance Sheet: The balance sheet offers a good look of a company's financial position at a specific point in time.
➡️Return on Investment (ROI): ROI measures the profitability of an investment relative to its cost.
➡️Return on Equity (ROE): This evaluates a company's ability to generate profits from shareholders' equity.
➡️Market Capitalisation: The total value of a company's outstanding shares.
Stock fundamentals also provide insights into the long-term prospects of an organisation plus any risks associated with investing. Since markets may not be efficient at accurately pricing stocks, fundamental analysis is more reliable in identifying overvalued or undervalued opportunities.
5 Stock Essentials
1️⃣ Company Research: How the company makes money? Dig deeper into what kind of services they offer or what they manufacture, how many countries they operate in, their flagship product and its sales, and whether they are considered a leader in the industry?
2️⃣ P/E Ratio
3️⃣ Beta: The measure of a company’s stock volatility over the last 5 years in comparison to the overall market. Beta is found alongside the P/E ratio on stock research pages. Defensive stocks usually have a low beta (less than 1.0)
4️⃣Dividend: If you are someone who doesn’t want to watch the market every day, dividends are a hands-off investment approach that generates a reliable income. These are similar to regular payouts, like interest in a savings account, offered by companies from their profits.
5️⃣The Chart: Reading different charts such as line charts, bar charts, and candlestick charts isn’t always easy. These charts are complex and take a lot of time. But you don’t need to overlook this step. As a retail investor, you want to prioritise stocks with charts that show an upward trajectory from the lower left to the upper right and avoid the ones with a downward trend.
In-depth research is irreplaceable, however, a smart way to safeguard your assets is long-term investing. A good idea would be to focus on dividend-paying stocks with a strong track record.
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