Why perform a Fundamental Analysis of a Company?

When it comes to investing, the traders always need accurate sources to decide where and how to invest in profitable stocks. To secure such accurate information, the popular tool that investor does use to manage portfolios is the fundamental analysis of stocks. Through the right analysis of stocks, traders can make handsome profits and it also helps them to differentiate the strong companies from the not so profitable ones.

Fundamental analysis of a company is being divided into two types; quantitative and qualitative. The quantitative analysis primarily focuses on using financial ratios and earnings projections. The source of such projection mainly comes through the reference of balance sheets and income statements. Another important document like the cash flow statement too is considered while conducting the analysis of the company.

The quantitative analysis comprises of Ratio analysis. It involves a calculation of a ratio that makes it clear of how the company performs and what are its share prices as compared to other companies. The other aspect of the quantitative analysis is through projected earnings. Now, every share you buy is directly proportional to the future price appreciation you are going to get. The dividend is the profit of the company that is distributed to the shareholders.

Similarly, the qualitative analysis makes the fundamental analysis of the stocks quite simple. The only disadvantage being it is not able to capture the qualitative aspects of the business. Qualitative analysis does not work on a set formula, rather it is subjective and depends upon the individual perception of what a trader thinks about the company and its stocks. Some of the aspects that a trader thinks in order to assess the quality of a company are its nature of the business, the kind of governance, nature of assets and liabilities, and the quality of earning.

Summing up the researching of Fundamental analysis of a stock or company is based on the few questions that needed to be asked:

  • What is the company about?
  • How well is the company functioning?
  • Is it a profitable business?
  • What is their annual turnover?
  • What kind of clout do they hold in the market?
  • How well ahead are they from their competitors?
  • Is it expanding its interests?

In case you wish to perform a fundamental analysis of your stocks and company, you could take advice from a reputed firm like JM Financial. The firm specializes in a various spectrum of businesses that range from Investment Banking, Equity, Debt, Commodity Sales and Trading, Wealth Management, Portfolio Management Services, Asset Management, Alternative Asset Management, Financing and Lending, Housing Finance and Distressed Asset Management. Their impeccable services have garnered JM Financial a huge satisfied customer base. Kindly do visit their website and see the various portfolios in the offering.



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