fundamental analysis v/s technical analysis to find out the value of a stock

1. FUNDAMENTAL ANLAYSIS
V/s
TECHNICAL ANALYSIS
PRESENTED BY
RAGHUNATH K

2. FUNDAMENTAL ANALYSIS
Fundamental analysis is a method used to
determine the value of a stock by analyzing the
financial data that is ‘fundamental’ to the
company. That means that fundamental analysis
takes into consideration only those variables
that are directly related to the company itself,
such as its earnings, its dividends, and its
sales. Fundamental analysis does not look at
the overall state of the market nor does it
include behavioral variables in its methodology.
It focuses exclusively on the company’s
business in order to determine whether or not
the stock should be bought or sold.

3. TECHNICAL ANALYSIS
Technical Analysis is the forecasting of
future financial price movements based on
an examination of past price movements.
Like weather forecasting, technical analysis
does not result in absolute predictions
about the future. Instead, technical analysis
can help investors anticipate what is “likely”
to happen to prices over time. Technical
analysis uses a wide variety of charts that
show price over time.

4. COMPARISON CHART
FUNDAMENTAL ANALYSIS TECHNICAL ANALYSIS
Definition
Calculates stock value using
economic factors, known as
fundamentals.
Uses price movement of
security to predict future
price movements
Data
gathered
from
Financial statements Past Share prices
Stock bought
When price falls below intrinsic
value
When trader believes they
can sell it on for a higher
price
Time horizon
Long-term approach Short-term approach
Vision
looks backward as well as
forward
looks backward

5. Most individual investors and
investment professionals
believe that fundamental
analysis is useful, either alone
or in combination with other
techniques. some of the
valuation measures it uses are

6. 1.EARNINGS
Simply earnings are how much profit (or loss) a company
has made after subtracting expenses. During a specific
period of time, all public companies are required to report
their earnings on a quarterly basis. Earnings are important
to investors because they give an indication of the
company’s expected dividends and its potential for growth
and capital appreciation.
2.EARNINGS PER SHARE
In order to make earnings comparisons more useful across
companies, fundamental analysts instead look at a
company’s earnings per share (EPS). EPS is calculated by
taking a company’s net earnings and dividing by the
number of outstanding shares of stock the company has .

7. 3.P/E RATIO
EPS is a great way to compare earnings across
companies, but it doesn’t tell you anything about how
the market values the stock. That’s why fundamental
analysts use the price-to-earnings ratio, more
commonly known as the P/E Ratio , to figure out how
much the market is willing to pay for a company’s
earnings. It can be calculated by taking its price per
share and dividing by its EPS.
4.PEG
PEG stands for Price/Earnings to Growth Ratio. PEG
is calculated by taking a stock’s P/E Ratio and
dividing by its expected percentage earnings growth
for the next year.

8. 5.DIVIDEND YIELD
The dividend yield measures what percentage return
a company pays out to its shareholders in the form of
dividends . It is calculated by taking the amount of
dividends paid per share over the course of a year
and dividing by the stock’s price.
6.DIVIDEND PAY OUT RATIO
The dividend payout ratio shows what percentage of a
company’s earnings it is paying out to investors in the
form of dividends. It is calculated by taking the
company’s annual dividends per share and dividing
by its annual earnings per share (EPS).

9. 7.BOOK VALUE
The book value of a company is the company’s net
worth, as measured by its total assets minus its total
liabilities. This is how much the company would have
left over in assets if it went out of business
immediately.In order to compare book values across
companies, investor should use book value per share,
which is simply the company’s last quarterly book
value divided by the number of shares of stock it has
outstanding.
8.PRICE/BOOK
A company’s price-to-book ratio (P/B ratio) is
determined by taking the company’s per share stock
price and dividing by the company’s book value per
share.

10. 9.PRICE / SALES RATIO
As with earnings and book value, investor cannot find
out how much the market is valuing a company by
comparing the company’s price to its annual sales.
This measure is known as the price-to-sales ratio (P/S
or PSR). Investor can calculate the P/S by taking the
stock’s current price and dividing by the company’s
total sales per share for the past year (or equivalently,
by dividing the entire company’s market cap by its
total sales).

11. 10.RETURN ON EQUITY
Return on equity (ROE) shows you how much
profit a company generates in comparison to its
book value . The ratio is calculated by taking a
company’s after-tax income (after preferred
stock dividends but before common stock
dividends) and dividing by its book value (which
is equal to its assets minus its liabilities). It is
used as a general indication of the company’s
efficiency; in other words, how much profit it is
able to generate given the resources provided
by its stockholders. Investors usually look for
companies with ROEs that are high and
growing.