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How to Conduct Fundamental Analysis of Stocks for Research

Determining financial health is essential in stock market investment. That’s where fundamental analysis comes into the forefront. It’s a process that helps you understand the business operations at the fundamental financial level.

While it helps businesses understand its rudimentary ideas, the biggest worry of any investor is overpaying for a stock. But this analysis enables you to examine the key ratios of any business.

fundamental analysis of stocks

An Overview of Fundamental Analysis

Fundamental analysis of the stock market is a rewarding study considering the history of this stock market. Here, you can evaluate security using financial, economic, quantitative, and qualitative parameters, thereby determining the intrinsic value.

As per beliefs, microeconomic and macroeconomic aspects can also affect the security’s value. Such aspects might be the following:

  • Economic Conditions
  • Industry Conditions
  • Management’s Proficiency
  • Financial Conditions

While using the stock research, your prime objective is to evaluate the security’s intrinsic value & compare it with that of the recent stock price. That way, assessing whether the security gets overvalued or undervalued becomes easier.

Steps to Perform a fundamental analysis of the Stock Market

Step 1: Know about the organization

Understanding the company’s mission and vision is a foundation step before you invest. Knowing the company’s objectives and goals helps you to decide how it will perform in the future and what your expectations should be. You will be able to understand whether the firm has the right decision-making team to generate future profits.

Besides, you can also assess whether you need to hold or sell your stock. The best way to acquire knowledge about the company is by visiting its official website and learning about their:

  • Management
  • Promoters
  • Products

Step 2: An insight into its financial reports

After you have amassed knowledge about the company, it’s time to analyse the finance. That includes the following:

  • Profit-loss statements
  • Balance sheet
  • Cash flow statements
  • Revenue
  • Expenses
  • Operating cost

Some Quick Notes: Every decent brokerage has a research desk with experts analysing stocks. The fundamental reports of any stock contain the details. They discuss a company’s fiscal results and offer data on its historical loss or profit alongside the balance sheet.

There’s a valuation view for investors to understand how much they pay for a stock. A few charts & graphics are present in every fundamental report. Get access to the details on trades and stock markets by creating a Demat account

Step 3: Consider the debt

Debt can degrade a company’s performance, so it’s a crucial parameter. Note that one security isn’t enough if the company has a huge debt. So, try looking for a company with a “debt & equity ratio” of not more than 1.

Step 4: Look for competitors too

Wouldn’t you want to increase your investment chances? If yes, looking for your chosen organisation’s competitors is best. Try finding the best peers who perform better or equally well as your chosen company. Ensure that it has better future scopes, forthcoming projects, and more.

Step 5: Give importance to the forthcoming prospects

Want to invest for the long term? It is time to consider the fundamental analysis and invest in companies that produce items useful for a minimum of 15 to 25 years.

Step 6: Review other aspects

Investing in a company and later on forgetting about it is your biggest mistake. So, you always need to stay updated about the chosen organisation. Please stay updated about its financial performance. Did you find any issues in that company? If yes, it’s better to sell your security right away.

A Final Note

Fundamental analysis and stock market research can be a great long-term approach. It offers a complete view of a company’s financial aspects. But as an investor, you must acquire knowledge by following the above steps to conduct the research accordingly.

After assessing these details, you can opt for fundamental & technical analysis to invest as per your expertise and preference. But remember, the process might be complex and time-consuming – so patience is your key.

Shitanshu Kapadia
Shitanshu Kapadia
Hi, I am Shitanshu founder of I am engaged in blogging & Digital Marketing for 10 years. The purpose of this blog is to share my experience, knowledge and help people in managing money.