If you have been studying the world of stocks, I’m sure you have already heard of the term Fundamental Analysis. You might be wondering what does fundamental analysis mean and what is it’s importance to your stock investing journey.
There are two major types of analysis being used to help somehow predict where a particular stock is heading, these are fundamental analysis and technical analysis.
For this post, let’s focus on fundamental analysis. Fundamental analysis is the study of factors which may affect the direction of a company’s stock price based on how the company is actually performing.
The main factors to take into consideration when doing fundamental analysis are as follows:
- Is the company’s management experienced? Does the current management have the strategic thinking that will bring the company to the next level? Is the management trustworthy and will not be involved in any insider trading or cooking books?
- If the company has debts, is it able to pay it’s debts and concentrate on growing the company’s net worth?
- Based on the company’s strongest competitors, does the company have a strategy that will let it beat its competitors?
- Is the company’s revenue growing?
Bottomline, is the company actually earning?
These are just the major factors for fundamental analysis, there are a lot more factors but don’t have that much of an impact when trying to forecast where a stock price is headed.