Fundamental analysis is a broad subject, it cannot describe in few words .Basically stock prices depend on market movement called momentum but Fundamentals are the ground for investing. In fundamental analysis, analysts review the business model, its competitors, earning growth, sales growth, management, debts and Future prospects of company. Here, some important facts are described briefly.
Business model and Management
This is the basic fact for analysis of a company. What is the business model of company? How does company earn money? What is the demand of product, which company sells? Answers of these questions will help to know about position and status of company in market. Growth of a company depends on its product and management. A strong management helps growth of company year by year.
Financial statement of a company does the key role in analysis. If company reports the sales, profit and revenue growth year to year, the company is growing. Growing E.P.S. helps to increase the stock prices in markets. Expenses of company must grow with sales of company.
Price to Earnings Ratio
Price to earnings ratio acts the key role to know fair value of stock. Most of analysts trust it. A lower P/E and high profit growth companies are the choice of big traders.