This website uses cookies to ensure you have the best experience. Learn more

Fundamental Analysis

4031 words - 17 pages

■ Fundamental Analysis:

Fundamental analysis is a technique that attempts to determine a security’s value by focusing on underlying factors that affect a company's actual business and its future prospects. On a broader scope, you can perform fundamental analysis on industries or the economy as a whole. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements

Fundamental analysis serves to answer questions, such as:

• Is the company’s revenue growing?
• Is it actually making a profit?
• Is it in a strong-enough position to beat out its competitors in the future?
• Is it able to repay its debts?
• Is management ...view middle of the document...

Nobody knows how long “the long run” really is. It could be days or years

By focusing on a particular business, an investor can estimate the intrinsic value of a firm and thus find opportunities where he or she can buy at a discount. If all goes well, the investment will pay off over time as the market catches up to the fundamentals

Fundamental Analysis involves in three steps:

1. Company Analysis
2. Industry Analysis
3. Economy Analysis

◙ The Company Analysis:

A company's financial statements, we're going to take a look at some of the qualitative aspects of a company.

Fundamental analysis seeks to determine the intrinsic value of a company's stock. But since qualitative factors, by definition, represent aspects of a company's business that are difficult or impossible to quantify, incorporating that kind of information into a pricing evaluation can be quite difficult. On the flip side, as we've demonstrated, we can't ignore the less tangible characteristics of a company

In this section we are going to highlight some of the company-specific qualitative factors that you should be aware of

●Business Model

Even before an investor looks at a company's financial statements or does any research, one of the most important questions that should be asked is: What exactly does the company do? This is referred to as a company's business model – it's how a company makes money.

Sometimes business models are easy to understand. Take McDonalds, for instance, which sells hamburgers, fries, soft drinks, salads and whatever other new special they are promoting at the time. It's a simple model, easy enough for anybody to understand.

Other times, you'd be surprised how complicated it can get. Boston Chicken Inc. is a prime example of this. Back in the early '90s its stock was the darling of Wall Street. At one point the company's CEO bragged that they were the "first new fast-food restaurant to reach $1 billion in sales since 1969". The problem is, they didn't make money by selling chicken. Rather, they made their money from royalty fees and high-interest loans to franchisees. Boston Chicken was really nothing more than a big franchisor. On top of this, management was aggressive with how it recognized its revenue. As soon as it was revealed that all the franchisees were losing money, the house of cards collapsed and the company went bankrupt.

At the very least, we should understand the business model of any company we invest in. The "Oracle of Omaha", Warren Buffett, rarely invests in tech stocks because most of the time he doesn't understand them. This is not to say the technology sector is bad, but it's not Buffett's area of expertise; he doesn't feel comfortable investing in this area. Similarly, unless we understand a company's business model, we don't know what the drivers are for future growth, and we leave ourselves vulnerable to being blindsided like shareholders of Boston Chicken were

● Competitive...

Other Papers Like Fundamental Analysis

Fundamental Rights Essay

2949 words - 12 pages ways. It has been an unmitigated tale of prejudice, discrimination and exploitation. At stake, in the ultimate analysis, is the very integrity and survival of Indian society. Without transforming vertical inequality in society into horizontal equality, democracy will have no meaning. The declaration of fundamental rights said that the depressed classes must be given the right of equal citizenship in common with other citizens of the state

Collaboration Fundamental Essay

402 words - 2 pages Collaboration Fundamentals Collaborating with others is essential for success academically and professionally. Collaboration is the act of a group of people with different skills and background coming together to produce or create something. Students in learning teams get to collaborate and share ideas with others within their group; which in results enhances the learning environment. In groups, students can bring out the best in each

Fundamental Rights

634 words - 3 pages A brief note on Fundamental Rights given to a citizen in Constitution of India. The Fundamental Rights embodied in the Indian constitution act as a guarantee that all Indian citizens can and will lead their lives in peace as long as they live in Indian democracy. These civil liberties take precedence over any other law of the land. They include individual rights common to most liberal democracies, such as equality before the law, freedom of

Fundamental Beliefs

4227 words - 17 pages 9- THE LIFE, DEATH AND RESURRECTION OF CHRIST. God sent Jesus, His Son, to live the perfect life we could not and die the death, our sins deserve. When we accept Jesus sacrifice, we claim eternal life. * God provided the only means of atonement for human sin. * This done by Christ`s life of perfect obedience to His Father`s obedience. * He suffered death and He resurrected. * Those who by faith accept this atonement may have

Fundamental Causes of Growth

892 words - 4 pages Throughout history, there are many factors that have had an effect on the growth of the economy. Most of these causes have had a very small effect overall and tend to be limited to a small area, so what we want to know is what the fundamental causes of these causes are. There are three basic theories that economic historians use to account for long run growth – geography, culture, and institutions. While all three are important and have had an

Marketing Fundamental Theory

1582 words - 7 pages Marketing may be described as a process where goods and services transcend to the customer from concept. This usually involves the elements of marketing being well coordinated. This starts with the development of a product that has been identified and selected, price determination, channel selection and implementation of the promotional strategy. New Apple products, for instance, are developed to include advanced application and systems, set at

Kfc Marketing Fundamental

1699 words - 7 pages compete in this fast food service industry and in the next 12 months, they need to conduct more research and prepare to face more challenges from macro environment, which they are unable to control. V - References: “The marketing environment and market analysis”, Insearch BMKT001 Lecture note, 2012. “Marketing Management”, Kotler & Keller, Pearson International Edition, 13th Edition, p.p 54, 120. “Marketing Management, Defining marketing for

Fundamental Principles of Sound Research

994 words - 4 pages Development The ability to integrate theory and practice requires rigorous self-examination, flexibility, and the willingness to remain open to personal growth and change. A commitment to self-examination suggests leaders, as part of their ongoing development, continually examine whether their actions match their words. Leaders should conduct a periodic, personal gap analysis. If inconsistencies exist, leaders should develop corrective action

Should Healthcare Be a Fundamental Right

560 words - 3 pages Business 102 February 15 2011 Fundamental Right – A basic or foundational right, derived from natural law; a right deemed by the supreme court to receive the highest level of constitutional protection against government interference. No I do not believe that healthcare should be a fundamental right. Rights are different than entitlements. Under natural law governments were created by free people to protect their natural rights, and no one

10 Fundamental Differences Between Linux and Windows

1980 words - 8 pages Having access to the source code is probably the single most significant difference between Linux and Windows. The fact that Linux belongs to the GNU Public License ensures that users (of all sorts) can access (and alter) the code to the very kernel that serves as the foundation of the Linux operating system. You want to peer at the Windows code? Good luck. Unless you are a member of a very select (and elite, to many) group, you will never lay

Plenty Arable Land Is Fundamental for Maize Processing Plant Development

516 words - 3 pages soil fertility, nutrient balance , focusing on improving the quality of maize cultivation , improve production quality corn deep-processing machinery. In short, plenty of arable land is fundamental of maize processing plant development. In order to achieve long-term development, we must ensure adequate corn feedstock. Meanwhile, the government should strengthen the control of corn arable land, and only by this, will the maize processing plant realize long-term stable development. For more information, please visit:

Related Essays

Fundamental Analysis During Financial Crisis

1887 words - 8 pages Was fundamental analysis redundant in the period during the Global Financial Crisis (GFC)? 3/21/2014 ABC Was fundamental analysis redundant in the period during the Global Financial Crisis (GFC)? Fundamental analysis is the process of evaluating the value of any security and certificate by analyzing the real time factors, which are based on qualitative and quantitative factors. Economic and the social factors also effect while you are

The Fundamental Value Analysis As The Basis Of Management Business Intelligence

2201 words - 9 pages слова: фундаментально-стоимостной анализ, капитал, стоимость, ценность, ликвидность, риск, доходность. THE FUNDAMENTAL VALUE ANALYSIS AS THE BASIS OF MANAGEMENT BUSINESS INTELLIGENCE This research paper presents the author's vision of using fundamental value analysis as a basis for management of business intelligence. Logic substantive content of the fundamental value of the research presented in the context of values, the fundamental value and

Fundamental Analysis Of Power Sector

3581 words - 15 pages to impress your prospective employer and what better way than to write some quality Hubs on HubPages. Join HubPages, ace your interview, and earn some easy money as well! All the best and don’t forget to keep the spirits high while you try! Google Keywords Tool - What every SEO writer should know The New Google Keywords Tool, Reviewed Google has released its new keyword analysis tool and naturally, we are interested. While the old

Fundamental Analysis On Power Sector

4636 words - 19 pages lasting improvements need a | |fundamental transformation in the company, probably involving training of the staff, possibly involving cultural change. The | |result should be financially beneficial with less customer churn, higher market shares, premium prices, stronger brands and | |reputation, and happier staff. However, there is a price to pay for these improvements. Costs will be incurred in the market | |research survey