What are the main Fundamental Analysis Tools?
- 1 decade agoFavorite Answer
* Fundamental analysis is the process of looking at the basic or fundamental financial level of a business, especially sales, earnings, growth potential, assets, debt, management, products, and competition...
Fundamental Analysis Tools
The most popular tools of fundamental analysis are:
1. Earnings per Share - EPS
2. Price to Earnings Ratio - P/E
3. Projected Earning Growth -PEG
4. Price to Sales - P/S
5. Price to Book - P/B
7. Return on Equity
None of these mean much on their own but when you combine some of them together and adapt your combinations based on the sector the company you're analyzing is in you will find that they are very good identifying the true value of a stock, thus find you identify the "ticket price" of your potential investment and to determine if your current investments are at or near their full potential...
This methodology assumes that a company will sell at a specific multiple of its earnings, revenues or growth. An investor may rank companies based on these valuation ratios. Those at the high end may be considered overvalued, while those at the low end may constitute relatively good value. But it could also mean that the ones on the low end are "bad companies" and are not worth investing in while the ones on the high end could be very good companies which still have room to grow... Remember that the market is usually right in the long run...
After all this work you will be left with a handful of candidates and this is where I recommend using technical analysis to develop a trading plan for each one of them. I know investors tend to shy away from technical analysis but this a grave mistake, in my opinion.
Knowing how to read charts and understanding that technical analysis is in fact understanding basic human psychology will help you maximize your gains and minimize your losses; how does that sound to you?
Hope this helps
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- 4 years ago
I look at Fundamental Analysis as an art that everyone admits is an art, while Technical Analysis is an art that some people try to pretend is a science. Honestly, give me ONE stock, right now, that based on TA will go up in the next 90 days regardless of market conditions (because what you are saying is FA does not predict market conditions and that is its flaw), the economy and corporate earnings. Technicians are great for looking at the past and pointing to how they were right, but I've never seen one who can predict accurately stock movement better than FA.
- Anonymous6 years ago
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- rehman vohraLv 61 decade ago
Depends on what you are analyzing.
Financial ratios are used to analyze the performance and liquidity of a firm
Investment analyses techniques are used to appraise an investment
If you are more specific, it would be helpful
Please visit investopedia.com. You will find most of your answers