Fundamental analysis attempts to determine the fair or reasonable price of securities ( " intrinsic value "). In contrast to the chart analysis is not based on a consideration of market prices, but on the business data and economic environment of a company, the so-called fundamentals.
The method is based on methods of financial statement analysis as well as on a number of share- price-related parameters, such as the dividend yield and the price-earnings ratio. The result obtained from the fundamental analysis, for example, a target that gives evidence of under - and overvalued stocks or companies providing the impetus for a designated as a value investing strategy for action in the stock market.
The efficacy of fundamental analysis is, as well as the technical analysis, contrary to the efficient market theory. Ihrzufolge it is not possible with any of the two methods to systematically achieve higher returns than the market.
Key figures of fundamental analysis
In order to make businesses of different sizes comparable, mostly quotient of corporate data are compared to evaluate a security. Here, as either quarterly or annual reports of the companies. Thus, the properties are comparable, the balance sheets of companies must be prepared according to uniform rules.
The price-earnings ratio (PER ) ( engl: Price - earnings ratio ( PER) ) is the best known ratio of fundamental analysis. This gives the PER by dividing the current price by the company's expected earnings per share. A stock that is at a PE below the long-standing industry-specific mean value, therefore, is considered auspicious. A PE ratio of 10 means that the company makes a profit of 10 % in relation to the company's value ( the value of all shares together) makes a PE ratio of 20, the gain is only 5%.
Price to book value ratio
The price to book value ratio ( PBV ) is obtained by dividing the current price of a share by the book value per share. The traditional theory of value investing implies that a stock is even cheaper, the lower their KBV, and that their fair value approximates the carrying value corresponds to (see also: Market value to book value ratio).
Price to sales ratio
The price to sales ratio ( PSR ) is determined by setting the current market capitalization of a company in relation to its (annual ) sales. The PSR does not consider the profitability of a company. The PSR is used for the assessment of joint-stock companies, write the losses as well as for Cyclical stocks. The PER is not attachable for these companies because there still are no profits. Tend a company is considered a low compared to the industry price to sales ratio as favorable.
Price to Cash Flow Ratio
The price to cash flow ratio ( KCV ) is obtained when dividing the current price of a stock by the cash flow per share. In the profit and loss account of the company's many different factors such as provisions or write-downs are included, which distort the result of the real money flow. The cash flow of a company is the real cash flows from in a given time period. Opposite the KGV the KCV is less vulnerable to the actions that will be undertaken by companies to schönigen their balance sheets. It makes a statement about how the price of a company is related to its liquidity. With the price - cash flow ratio can speak assess the evolution of profitability of a corporation. As a measure of the KCV applies seven as a guideline for a fair assessment, since the KCV is below the earnings. In the annual report of the company under consideration is € 700 million reported as cash flow. Dividing this value by the number of shares ( 201 million ), one obtains the cash flow per share: 3,48 €. Consequently, we have by 7.18 if one sets a stock price of € 24.99 in our example, a KCV.
Return on total capital
Return on assets ( ROA ) is an indicator which helps the analysts to evaluate a company's profitability. It specifies how a company uses its available capital to make a profit. You add to this the income and interest expense to get the really earned profits. Now we divide the result by the total capital and multiplying the quotient by hundreds and receives a percentage, which shows the efficiency of the company during the calculation period for the return on assets. For the analyst, this figure says a lot about the management of the examined corporation. Even with the return on assets, it is difficult to define a standard because it is heavily depends on the industry and thus can have huge differences from industry to industry. But to make everything a little more concrete, we define a universal scale fixed: A GKR greater than 12 % is considered good. If the GCC including, the assessment is negative. The example companies has an interest expense of € 1 billion and a total capital of € 12 billion. With the known values (profit: € 603 million ), a GCC calculated by 13.36%.
The equity ratio ( EKQ ) shows the equity of a company in relation to its total capital as a percentage. These shares are equity by total assets and multiplied the result by 100 with this code aims to analyze the financial stability and debt dependence of the Company. The higher the EKQ, the higher the stability and independence of external funds. In addition, the creditworthiness of the corporation improved with a higher EKQ and thus also increases the chance to take on more debt. A lower proportion of foreign funds also reduced the profit schmälernde / loss increasing interest burden (so-called "finance leverage" ). This is especially in times of sub-prime crisis in which the banks will be more cautious in lending, important because companies are not so easy to get a high EKQ problems with rising interest rates or a lack of investment capital. Many investors consider a EKQ = 40 % as well. This value speaks for the independence and stability of the analyzed company. For the calculation of the EKQ all the data from the example already available ( equity or book value: € 5.5 billion, total capital: 12 billion € ). The calculated EKQ is therefore 45.83 %.
Evaluation of indicators
In fundamental analysis, the individual figures are now calculated. For this purpose, create a formula to calculate the individual values of a measure. There are no general guidelines on how far these figures are to be weighted, ie how strong they are each included in the overall assessment of the share.