Fundamental stock analysis is quite different from technical stock analysis. This type of stock analysis looks at the business behind the stock in its most fundamental form.
Although fundamental stock analysis and stock market technical analysis are different they do have one common goal. That common goal is to determine or anticipate the future price of a stock. Fundamental analysis is longer-term in nature simply because a company's fundamentals don't necessarily change on a day by day basis.
Fundamental analysis allows you to assess the health of a company. The financial health of company is not only affected by internal sources, but external factors as well. One such factor would be the company's market share for the products and services they sell. Clearly market share is determined by the other players in the marketplace. If you happen to be researching a company whose market share to is about to explode you can have a real winner on your hands.
The external factors influencing the company's position in the industry will eventually show up in its our earnings. Investors want to buy companies whose earnings are increasing or are projected to increase. This makes the earnings-per-share also known as the EPS a heavily weighted factor in fundamental stock analysis.
Along with earnings there are other fundamental factors such as book value, dividend yield, return on equity, price to earnings ratio also known as P/E, etc. while each of these is looked at and researched individually, it is important to realize that all of them must fall within certain ranges to make a stock a good purchase candidate.
Fundamental stock analysis has advanced in its ability to take advantage of the available computer technology. Today, fundamental research can be done using computer programs similar to those used in technical analysis. It is even possible to screen stocks based upon their fundamentals such as earnings, price to earnings ratio, etc. With these type of stock analysis tools the investor is able to narrow down his search for the particular stocks that meet his investment criteria.
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