1/19/2017 (2)Whatarethefundamentalanalysisparameterstoconsiderforstocktrading?

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termtrading?

SowmayJain,Investor&Blogger What"fundamentals"shouldIlookatbeforetradinga
WrittenApr3,2016 stock?

I answered a similar question (What are the dierent technique for selecting stock?). Whatratiosdoyouconsiderwhiledoingfundamental
#copied analysisofastock?

WhatfundamentalpointswillyouconsiderifIaskyou
It is not possible to say which stocks are best or are not. Time to time due to change in
tobuySBIstock?
price, stocks become cheap and expensive. So, just evaluate stocks before buying
them. Below is an example of evaluation of stock of SBI. Isitpossibletobuyandsellstockssuccessfullyfor
clientssolelywithfundamentalanalysis?
There are supreme three criteria to evaluate a stock:-
Whataresomebestresourcestolearnthe
fundamentalanalysisforstock?
PE ratio with constant EPS
Whatarethefundamentalparameterswhichhelpsin
High DCF valuation stockpicking?

Dividend yield (from the prospective of retail investors) Cansomeoneofferadetailedprocessfortechnical

analysisandfundamentalanalysisforIndianstocks?
Lets go with the rst,
Whatisafundamentalanalysisofthestockmarket?
Below are the EPS and book value of SBI for ve years.
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LastAskedSep28
It is constant revolving around 150 to 200 every year. You may have noticed that their
is sharp decline in EPS in the year march'15. This is just because in nov'14 SBI split 1MergedQuestion

their stock into 10 shares, so technically if they had not spitted then their EPS will be Edits

175.5

So, SBI is driving a constant EPS year after year.

Second criteria,
It the most important criteria for evaluating a stock, this method is used by world's
third richest man Warren Buett. So, relevancy of this method can be predicted.

Let us rst understand why this method is important. In stock market everybody
knows the price of everything but the value of nothing. There are many source to
know the price of shares TV, internet etc but the value of a stock is something which
can only determined by your judging sense. Don't worry, even by using 9th grade
math you can evaluate a stock.

When the best time to buy a stock?

When the price of stock is cheaper than value of stock. We know the price but have to
calculate the value. There are many ways to value of stock. Best ever I found is
Discounted Cashow (DCF).

What is DCF?

All future cash ows are estimated and discounted by using cost of capital to give
their present values (PVs). The sum of all future cash ows, both incoming and

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1/19/2017 (2)Whatarethefundamentalanalysisparameterstoconsiderforstocktrading?Quora
outgoing, is the net present value (NPV), which is taken as the value or price of the 2
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cash ows in question.

Lets us examine SBI with DCF,

As we know that SBI is delivering a constant return of 150 to 200 INR, so it is easy to
predict its future cash-ows. Don't get confuse between cashow and EPS. Cashow
is the cash received during whole year (whetherearned or not) and EPS is total earned
income (whether received or not). But the ratio between them is always constant, so it
will easy to predict future cashow through EPS.

"DCF [Intrinsic value is] the discounted value of the cash that can be taken out of a
business during its remaining life."

Below is the steps to nd the intrinsic value through DCF,

1. Take the free cash ow of year X and multiply it with the expected growth
rate

2. Then calculate the NPV of these cash ows by dividing it by the discount rate

3. Project the cash ows 10 years into the future and repeat steps 1 and 2 for all
these years

4. Add up all the NPV's of the free cash ows

5. Multiply the present share price by growth rate and then reduce it by
discounted rate to get the sell o value*

6. Add up the values from steps 4, 5, and Cash & Cash Equivalents to arrive at
the intrinsic value for the entire company

7. Simply divide this number with the number of shares outstanding to arrive at
the intrinsic value per share

* For this calculation we assume that the company's share price after 10 year will be
roughly equal to present MPS + growth rate. This is because it is impossible to predict
the future, especially more than 10 years ahead. So, with some margin of safety we took
the above approach.

It is not possible to see the whole calculation here. I did it oine, so valuation
of SBI through this valuation method (with certain amount of margin) is
under around 150 INR. And you opportunity are always there in markets. The
price of SBI was 154 INR on 11th feb 2016. If you are curious enough to detect
the stocks you should have bought this stock on 11 Feb. Although I bought it
on 17th Feb for 158 INR (+4 Rs) but still it was a good deals. Now its dealing at
182 INR which equals to 15% return in just 15 days. That is how you should
pick a stock to gain from cheap rates.

Now the third criteria,

Dividend yield, this criteria will be helpful if you keep this stock for long. Company is
paying around 3.5 INR per share. So, if I've 1000 share of SBI then I'll be eligible for
3500 Rs each year extra just for holding the shares. There are many more benets that
company can give you while you holds the share like bonus dividend. bonus share,
rights issue.

In short, buy shares at cheap rates and hold it for long time. You'll get benet from
capital appreciation and dividend cashow. And the most important part is that it
reduces the cost of brokerage and tax.

Get more of me on my blog. (And also get free tips and tricks for investing through
subscription email , I'll notify you with a email update wherever a new post is
published)
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PulakPriyesh,Tradingfromlast8yearsachievedhighestrankasa
trader.

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1/19/2017 (2)Whatarethefundamentalanalysisparameterstoconsiderforstocktrading?Quora
WrittenSep29
2
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Being a technical research analyst it's dicult for me to help you in fundamental
ways of tracking stocks but still focus on such things like,
1 PE ratio
2 Book value
3 Quarter results
4 Promoters holding
5 FII - DII interest in stocks
6 Bulk & Block deals
7 Volumetric analysis

You can check stocks over all these aspects

Thanks
242ViewsViewUpvotesAnswerrequestedbySundeepKumar

Upvote 2 Downvote Comment 1

SuChan
WrittenFeb12,2016
OriginallyAnswered:Whatarethefundamentalfactorsthatyouneedtoconsiderinstocktrading?
There are mainly 2 fundamental factors that you need to take care of while trading in
stock:

Fundamental factors about the company is very most essential factor and stock
trading signals that assist you in taking decision about picking stock from right
company.

Fundamental insights like as revenue generation, assets, revenues, liabilities

including other nancial aspects of the company should be taken into consideration.

77Views

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RaghavRao,IaminEquityResearchandhelpothersgrowmoney!!
Doingthissince1985
WrittenDec5,2015

For taking an investment decision the following things to be watch out for

1. Status of Economy

2. Industry outlook

3. Global indicators

4. Government Policies

5. Investor apathy
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