Fundamental Analysis

What is Fundamental Analysis?

Fundamental analysis evaluates a company's intrinsic value by examining financial statements, competitive position, and growth prospects. It helps determine if a stock is overvalued or undervalued.

Financial Statements

Income Statement

Shows profitability over a period:

Revenue: Total sales
Gross Profit: Revenue minus cost of goods sold
Operating Income: Profit from operations
Net Income: Bottom line after all expenses and taxes

Balance Sheet

Snapshot of assets, liabilities, and equity at a point in time. Assets = Liabilities + Equity

Cash Flow Statement

Shows actual cash moving in and out. Operating, investing, and financing activities.

Key Valuation Ratios

Ratio	Formula	What It Tells You
P/E Ratio	Price / Earnings per Share	How much you pay for each dollar of earnings
P/B Ratio	Price / Book Value	Price relative to company's net assets
P/S Ratio	Price / Sales per Share	Valuation relative to revenue
PEG Ratio	P/E / Growth Rate	P/E adjusted for growth
Dividend Yield	Annual Dividend / Price	Return from dividends alone

Earnings Reports

Companies report earnings quarterly. Key things to watch:

EPS Beat/Miss: Did actual earnings beat estimates?
Revenue: Is the top line growing?
Guidance: Management's outlook for future quarters
Margins: Are they improving or declining?

💡 Earnings Season Tip

Earnings reports can cause significant price moves. Consider reducing position size or closing before earnings if you don't have a specific thesis.

📋 Key Takeaways

Review this lesson's material before moving on
Practice the concepts on a demo account
Take notes on what you've learned