FUNDAMENTAL EQUITY ANALYSISFundamental equity analysis focuses on the nuts and bolts of the particular stock. Fundamental analysis looks at the particular stocks P/E ratio, inventories, the profit margins as well as such things as market share and the overall mood of the stock market. Be it bearish or bullish, that will certainly effect your decision on the action to take on a particular equity. Some of the key factors in fundamental equity analysis include: Analyst's ratings - Ratings on equities range from strong buy to strong sell with about 8 levels in between. I personally tend to discount analyst's ratings as I find them to be very late to recognize a trend. During the recent market turmoil, many of the analysts did not advise you to sell until the bottom of the move. Exactly the wrong time to do so. I myself am a contrarian (do the opposite of the crowd) and I do find these rating useful in that respect! Market Cap - Basically this tells the size of a company. Be it Large, mid or small cap. Earnings per share - This is related to the P/E ratio and obviously the better the earnings, the lower the price to earnings ratio. Company Debt - I look at an equities debt as a strong measure of the health of the company. If it is too high, I go running for the hills and look at another stock. It does however provide as a good measure for potential shorting opportunities! Is the stock an industry leader - I find this a very important piece of information. If an equity lags the companies it competes with, how can it be a good buy. That is a basic of fundamental analysis. I hope this look at fundamental equity analysis has given you some insight into choosing the right stock to make some money!
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