If you are interested in the world of the stock market, this article will provide you with the knowledge you need to make a good analysis of the assets you are considering investing in. Indeed, even before acquiring shares, you need to carry out some analysis of the situation of the company issuing them. This is where fundamental analysis comes in, as it allows us to know the value, performance and financial health of a company and therefore to assess its profitability.
Before all, you will have to keep in mind a certain number of questions preliminary to any stock exchange operation, namely all that relates to the turnover of the company, its profits, its position vis-a-vis competition, its solvency or its possible debts. Thanks to the fundamental analysis, you will be able to answer all these interrogations and thus to know if it is interesting or not to treat the securities of the targeted entity.
Of course, this analysis takes into account a lot of data and consists of both qualitative and quantitative data. As far as the qualitative aspect is concerned, it actually corresponds to the specificities of the company including non-material factors such as patents, brand, products and more generally the reputation of the company.
We will also take into account the experience and know-how of the company's managers, which will give us an overall view of the way the company is managed, but also of its positioning in relation to the competition in the same sector of activity.
The quantitative analysis will mainly take into account figures such as assets, profit, result, balance sheet and market research.
To obtain the quantitative values of a company, one must use financial and accounting analysis and study both present and past values. Market research, on the other hand, links to technical analysis, as it uses the fluctuation of basic indicators such as volume and price to determine market sentiment.
But fundamental analysis also requires taking into account the financial analysis of the listed company. To do this, we will study the value of the share and try to find out if it is undervalued or overvalued.
If the fundamental analysis of the securities of a company is essential to any stock exchange trader, it is not enough to establish an effective long-term strategy. Indeed, this type of analysis is complementary to the technical analysis and it is thus advisable to systematically compare the results of these two studies to determine in a sure way the possibilities of evolution of the prices of these assets.
Clearly, fundamental analysis is nothing more than a tool to be used in correlation with any other conclusive indicator. But it also offers an additional possibility to technical analysis in that it allows you to determine how the market will react to the different data studied. To do this, you will of course have to use your logical mind, but also compare the current situation with a similar situation in the past or with another company in the same sector.
If you spot a particular case that has caused a strong reaction from investors in the past and thus influenced the share price up or down, it is quite possible that the reaction will be the same again. As you will have understood, fundamental analysis requires a good knowledge of the company's stock market history and is therefore easier to apply to older companies, as newer ones have little history.
As you have now understood, fundamental analysis is an indispensable method to evaluate the possibility of rise or fall of the price of a value such as a stock exchange share. Thus, if you are considering taking a position on a stock, you must pay attention to various basic fundamental indicators and current fundamental indicators. Here are the things you need to watch out for:
For the fundamental analysis of the current value of a company, the following indicators will be used:
As for the future of the company, in addition to the analysis of its current situation, we will also take into account other news that may have an important influence on the evolution of its share price on the stock market, such as :
On our site, you will find detailed information for each major listed company to further facilitate your research and make this fundamental analysis more effective.
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