Stock analysis

What are the factors important in the fundamental analysis

Fundamental Analysis can be broken down into two parts…

  1. Qualitative Factors

  2. Quantitative Factors.

In Qualitative factors you study things like the industry the company is operating in, the competition within in industry, corporate governance, industry growth, secular trends in the industry, innovation, product development, technology disruption, pricing power, share holding, transactions in the industry etc.

In Quantitative factors you study things like Revenue growth, EBITDA margin, PBT margins, PAT margins, EPS, finance charges, Capital employed ---- basically all numbers and ratios related to P&L, Balance Sheet and cash flow statements. Plus you also need to run through valuation metrics like - fair value, PE, EV etc.

A fundamental study without incorporating the study of these two factors would be incomplete. One has to pay equal attention to both these factors


Very basic stuffs would be

  1. Total Debt levels of the company for last 5 years (trend of it also)

  2. Closing cash and cash equivalents of the company in last 5 years (trend of it also)

  3. Net profit/loss of the financial year (last 5 years)

  4. Brand name, products they make, is it a daily use product etc. and similar assessment on brand.

  5. Shareholding - Promoter shares are pledged or not.

If debt levels are zero or compared to profits+cash equivalent (can pay off debts in one or two financial years, the company can be filtered out for next level)

If profits show an increasing or sustaining trend, then it is next level filter,

Brand is important.

Promotoer shares if not pledged is good. If pledged it should not be more than 20% to 30% of promoter holdings. more than 80% pledged is danger zone.

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