There are many aspects to fundamental analysis like information about:
the top management of the company,
knowing all the company as well as sector related news
any rules and regulations as well as changes in them, basically, anything that can have an impact on the profitability of the company.
Other than this, the most important aspect is the financials of the company.
The most important source for obtaining most of the required information for doing the fundamental analysis is the annual report of a company. The whole annual report is quite large and it is pretty cumbersome to read all of it while making sense of it.
Therefore, in the process to learn fundamental analysis, you should know which sections are the most important from an investor point of view and where to look for them.
The first thing that one should look for in an annual report is management discussion and analysis or chairman’s message part. This portion contains the opinions and ambitions of management of a company and their views on the sector of the company, its opportunities and threats, etc.
Then, one should look at the performance highlights of the financial year which will provide a gist of how the operations of the company have been over the last financial year. Sometimes, this portion also contains financial ratios.
The knowledge about financial ratios, their derivations, significance and how to use them in order to analyse the financial health of a company should be gained by long term investors.
The financial ratios prove to be very beneficial in analysis when they are looked in comparison with the company’s competitors of the same sector. This is seen as one of the most important metrics while you equip yourself and learn analysis of stocks.
And also, if we make a comparison of the financial ratios with previous financial years, it also gives a fairly accurate picture of the operations and financial health of the company.
Next and the most important part to analyse is financial statements which are balance sheet, profit and loss statement and cash flow statement.
You should definitely try to understand not only the components of these financial statements but also know how to read in between the lines and about different things that should raise red flags.
In order to gain all this knowledge, there is a lot of information in books and on the internet. You can also check out some of the top books on fundamental analysis as well.
Here is a quick video on that topic:
One of the most reliable and good quality sources is a stock market education app which is called Stock Pathshala. It contains man online stock market-related courses.
There are two separate courses on this app which are very important for fundamental analysis. One is a beginners guide to fundamental analysis and the other is of specific financial ratios.
Nonetheless, this is pretty much what we wanted to cover in this review on how you can learn fundamental analysis of stocks. In case you are looking to get started with your investments, let us assist you in taking the next steps ahead.
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More on Share Market Analysis
If you wish to learn more about how to analyse the stock market, here are a few references: