Fundamental Analysis it understands the status of the company such the health and the further prospects in the future. Study and analyzing financial statements and annual reports is to identify the comparison advantage of competitors, the environment market and within the company. The primary reason for the fundamental analysis is to the analyzing the stock market. The stock market is the basis for the upcoming existing price in different markets or companies; without doing the fundamental analysis the company or the market might give the injustice price to the consumers. Understand financial report from different companies will point out if the stock value is overvalued or undervalued at the present price market. Fundamental analysis can also be used for economy and basic sectors.
The question is how fundamental analysis work? In the procedure of fundamental analysis, it starts analyzing financial statement including the ratios financial. In another word it will tackle about the capital financing, new issues equity, cash flow operating and dividends paid. The concept in estimating earnings and projection of growth rate were the ideas of Thomson Reuters, that base from people validity perception. To identify the rate growth of cash and income, and the level of risk are useful for the diverse valuation theory. Before anything else most important in fundament analysis is the cash flow discounted design that can calculate the current value for the future. Read more
The flow of the certain design is that investor received the dividend together with the eventual sale price, the company earning or the company cash flows. The value of the company debt possession is also considering as the basis of the health or the status of the company /business by determining the current ratio of liabilities and assets including debt-equity ratio. Part of the process is the price-earnings ratio; this model is underlying the idea in valuing the time of money is that capsize of the price-earnings ratio is the rate discount is suitable to the probability of the business. The price-earnings ratio is assimilating the estimation of growth. The validity of the analysis depends on the duration of time because the analyst believes the growth is persistent. Another model that use for the fundamental analysis is the IGAR design. This design is useful in the process of the expected changes of price-earnings growth and history rates growth for the stocks contemporary to the index comparison.
The last design is the Computer design, which is the replacement of the subjective clarification of the important data in the field of the industry. With the advancing and techier design, it can process a large quantity of data, and it created a new career. One of those is the Quant fund, which the decision basis exclusively in mathematical designs not in the manager.
The procedure of the fundamental analysis indicates with the mathematical principle. As you notice fundamental analysis deals with the number of price or value. To achieve the correct estimation of the stock market math is essential in fundamental analysis.