Investing: Fundamental Analysis Cheat Sheet

Overview

Fundamental analysis evaluates a stock's financial health, business model, and market conditions to determine its intrinsic value, helping investors make informed decisions.

Key Components of Fundamental Analysis

1. Financial Statements Analysis

   • Income Statement: Revenue, expenses, and net profit trends.
   • Balance Sheet: Assets, liabilities, and shareholder equity.
   • Cash Flow Statement: Operational, investing, and financing cash flows.

2. Valuation Metrics

   • Price-to-Earnings (P/E) Ratio: Stock price compared to earnings per share.
   • Price-to-Book (P/B) Ratio: Stock valuation against its book value.
   • Earnings Per Share (EPS): Indicator of profitability growth.
   • Dividend Yield: Returns from dividends relative to share price.

3. Industry & Market Analysis

   • Competitive Position: Assess company standing within the industry.
   • Economic Indicators: Interest rates, inflation, and GDP trends affecting stock values.

4. Qualitative Factors

   • Company Leadership: Management experience and decision-making effectiveness.
   • Business Model Sustainability: Long-term viability and revenue streams.
   • Market Sentiment & News: Investor perception and recent developments.

Common Pitfalls & How to Avoid Them

• Overlooking External Factors: Consider industry trends alongside company performance.
• Focusing Only on Short-Term Data: Prioritize long-term financial health.
• Ignoring Risk Factors: Examine debt levels and market volatility.

Tools & Resources

• Financial statement databases for corporate analysis.
• Investment research platforms with stock valuation metrics.
• Economic forecasting tools to assess market conditions.