Many people ignored fundamental analysis as they thought this required a skill to check company balance sheet and need to read many reports.
Actually, if you check fundamental analysis of a company with below points you are able to check fundamental analysis within two minutes and not more than that.
First you need to login to screener.in website to check fundamental analysis of any company. This website is very useful and accuracy is very high.
Once you logged in this website then need to set below parameter .
- Market Capital
- Stock PE
- Book Value
- Dividend Yield
- ROCE
- ROE
- Face Value
- Promotor holding
- Pledged Percentage
- Debt to Equity
- OPM
- Current Ratio
Now we will see in details how to check fundamental analysis with these points.
- Market Capital : Market capital is very good tool to identify the multi bagger stocks.
If you compare two peer companies from same sector and if you find both companies are doing good in the market but the first company’s market capital is very high and second one is still very low with market capital then the second one is your multi bagger stock. If both company’s business are same and same growth then the second company which is having market capital is low should grow with stock price hence you can buy the stocks and keep it for long term.
2. Stock PE : PE ratio need to calculate with EPS. EPS is earning per share. PE ratio tells us how much stock price is overvalued or undervalued. Here you need to compare stock pe ratio with industry pe ratio. If stock pe ratio should be less than industry pe then we can consider as it’s a undervalued stock, and you can invest .
If STOCK PE ratio is greater than industry pe ratio then its over valued stock you should not invest in it.
3. Book Value :
Book Value = Share Capital + Reserve / Total no of shares.
If share price is less than book value then its a positive for that stock. If share price is more than book value then also its not that much bad for that stock.
4. Dividend Yield :
Companies are giving dividend to share holders.
large companies dividend average is 1.5 %
PSU companies are giving more dividend
Strategy for taking more dividend .
- Apply 200 SMA on chart.
- Time frame : Daily
- BUY ENTRY : When stock price is coming down 20 % from 200SMA level
- Target : Last parabola or 200 SMA level
5. ROCE : ROCE is return ratio on capital employed.
If a Company has taken loan then return will be calculated on the basis of loan & Best interest and tax.
Example A person stared a company with its own capital of 50 Lakh & Loan of 50 lakh then return will be calculated on all capital will be ROCE.
ROCE : EBIT / Equity Capital + Debt
ROCE is more than 20 % then the company is great. We can trade.
ROCE calculations is not applicable for Banking and NBFC companies
6. ROE : ROE is return ratio on its share holders equity. ROE = Net Profit / Equity Capital
It is used in relation with peer company or average ROE of industry ROE must be above 15 % buy we can consider above 10% for trading
For a good business ROE should be above 10% for last 5-10 Years
7. Face Value : As per equity capital investment promoters get some shares. The price of that shares is called face value.
Face value doesn’t change until the stock is spilt.
Face value has no significance in fundamental analysis of any stock.
8. Promoter Holding : Strong Hands = Promoter + FII + DII
Strong hands holding should be more than 70%
Weak hands = Retail + HNI
9. Pledged Percentage : Company pledge shares and take loan.
its a risky as in any reason that stock price will be down then banks will sell that shares and company will not able able to repay the loan.
If pledged percentage is more than 10 % then avoid that company
10. Debt to Equity :
Debt to equity tells about the companies capability to pay its total debts over its share holders equity. Higher debts eats profit of the company and create less survival chance in any bad situations.
Ex : A company has total equity capital of 40 Lakh ad its debt is 50 lakh that means company may go bankrupt . This means company has less money in hand and debt are more.
Zero debt company is a great company we use less than 0.25 ratio for trading.
This rule is not applicable for banking and NBFC.
11. OPM :
OPM = Sales / Operation Profit * 1000
By observing OPM we can decide that how much company is efficient in making operational profit.
It is used to compare same business companies that which one is better in terms of operation and sales.
Negative OPM is red alert for the company. If open is stable then also no issues. Increasing OPM is always good.
OPM is different for different businesses so observe it with peers companies only.
12. Current Ratio : Current ratio is important ratio to get idea about companies capability to pay its short term liability with its short term assets, else company have liquidity issues and have to take more loans.
- current ratio = current assets / current liabilities
This Ratio tells about companies short term needs to be fulfilled like employee salary, bills, EMI, etc.
Less than 1 current ratio is negative for company Ideally his should be above 3 . Above 2 also ok for trading.
Use these points and do your fundamental analysis before your investment.
