Fundamental Analysis

Fundamental analysis attempts to measure a security’s intrinsic value by examining related economic and financial factors including the balance sheet, strategic initiatives, microeconomic indicators, and consumer behavior.

Essentials

Contents:

• 1. Required Rate of Return – RRR
  • 1.1. What Is Required Rate of Return – RRR?
  • 1.2. The Formula and Calculating RRR
  • 1.3. What Does RRR Tell You?
  • 1.4. Examples of RRR
  • 1.5. RRR vs. Cost of Capital
  • 1.6. Limitations of RRR
• 2. The Formula for Calculating EBITDA (With Examples)
  • 2.1. Ways to Calculate EBITDA
• 3. Book Value Per Common Share - BVPS Definition
  • 3.1. What is Book Value Per Common Share?
  • 3.2. What Does BVPS Tell You?
  • 3.3. Example of BVPS
  • 3.4. The Difference Between Market Value per Share and Book Value per Share
  • 3.5. The Difference Between Book Value per Common Share and Net Asset Value (NAV)
  • 3.6. Limitations of BVPS
• 4. Amortization vs. Depreciation: What’s the Difference?
  • 4.1. Amortization vs. Depreciation: An Overview
  • 4.2. Depreciation
  • 4.3. Special Considerations
• 5. Revenue vs. Profit: What’s the Difference?
  • 5.1. Revenue vs. Profit: An Overview
  • 5.2. Revenue
  • 5.3. Profit
  • 5.4. Example: Revenue vs. Profit
  • 5.5. Key Differences
  • 5.6. Special Considerations
• 6. Bottom-Line Growth vs. Top-Line Growth: What’s the Difference?
  • 6.1. Bottom-Line Growth vs. Top-Line Growth: An Overview
  • 6.2. Key Differences
  • 6.3. Special Considerations
  • 6.4. Bottom-Line Growth vs. Top-Line Growth: Example
• 7. Cash Cow
  • 7.1. What Is a Cash Cow?
  • 7.2. Understanding Cash Cows
  • 7.3. Cash Cow Example
• 8. Economic Moat
  • 8.1. What is an Economic Moat?
  • 8.2. Understanding an Economic Moat
  • 8.3. Sources of Economic Moats
• 9. Strength, Weakness, Opportunity, and Threat (SWOT) Analysis
  • 9.1. What Is SWOT Analysis?
  • 9.2. Understanding SWOT Analysis
  • 9.3. A Visual Overview
  • 9.4. Example of SWOT Analysis
  • 9.5. Advantages of SWOT Analysis
• 10. Porter’s 5 Forces
  • 10.1. What are Porter’s Five Forces
  • 10.2. Understanding Porter’s Five Forces
  • 10.3. Competition in the Industry
  • 10.4. Potential of New Entrants Into an Industry
  • 10.5. Power of Suppliers
  • 10.6. Power of Customers
  • 10.7. Threat of Substitutes
  • 10.8. Understanding SWOT Analysis
  • 10.9. A Visual Overview
  • 10.10. Example of SWOT Analysis
  • 10.11. Advantages of SWOT Analysis
• 11. Net Worth
  • 11.1. What is Net Worth?
  • 11.2. Understanding Net Worth
  • 11.3. Net Worth in Business
  • 11.4. Net Worth in Personal Finance
• 12. Book Value
  • 12.1. What is Book Value?
  • 12.2. Breaking Down Book Value
  • 12.3. Historical Cost
  • 12.4. Mark-to-Market Valuation
  • 12.5. Price-to-Book Ratio
  • 12.6. Understanding Net Worth
  • 12.7. Net Worth in Business
  • 12.8. Net Worth in Personal Finance
• 13. Market Value
  • 13.1. What is Market Value?
  • 13.2. Understanding Market Value
  • 13.3. The Dynamic Nature of Market Values
• 14. Fundamentals
  • 14.1. What Are Fundamentals?
  • 14.2. Fundamentals Explained
  • 14.3. Macroeconomics and Microeconomics
  • 14.4. Fundamentals in Business
  • 14.5. Economic Level Fundamental
  • 14.6. Fundamental Analysis
  • 14.7. Real World Example
• 15. How Do I Read and Analyze an Income Statement?
  • 15.1. What Does an Income Statement Look Like?
  • 15.2. How Is It Used?
  • 15.3. Fundamentals Explained
  • 15.4. Macroeconomics and Microeconomics
  • 15.5. Fundamentals in Business
  • 15.6. Economic Level Fundamental
  • 15.7. Fundamental Analysis
  • 15.8. Real World Example
• 16. Price-to-Earnings Ratio – P/E Ratio
  • 16.1. What Is Price-to-Earnings Ratio – P/E Ratio?
  • 16.2. P/E Ratio Formula and Calculation
  • 16.3. Forward Price-To-Earnings
  • 16.4. Trailing Price-To-Earnings
  • 16.5. Example of Using the P/E Ratio
  • 16.6. P/E Ratio vs. Earnings Yield
  • 16.7. P/E vs. PEG Ratio
  • 16.8. Absolute vs. Relative P/E
  • 16.9. Limitations of Using the P/E Ratio
  • 16.10. Other P/E Considerations
• 17. Price-To-Book – P/B Ratio
  • 17.1. What Is Price-To-Book – P/B Ratio?
  • 17.2. P/B Formula and Calculation
  • 17.3. Market Price per Share​
  • 17.4. Learning From Price-To-Book
  • 17.5. Equity Market Value vs. Book Value
  • 17.6. P/B vs. Price-to-Tangible-Book Ratio
  • 17.7. Limitations of the P/B Ratio
  • 17.8. Example of Using the P/B Ratio
• 18. Should You Pay More Attention to the EV/EBITDA or P/E Multiple?
  • 18.1. Understanding How the P/E Ratio Works
  • 18.2. P/E Ratio Shortfalls
  • 18.3. Advantages of Using the EV/EBITDA Multiple
  • 18.4. EV/EBITDA Flaws
  • 18.5. P/E Versus EV/EBITDA
• 19. Porter’s 5 Forces vs. SWOT Analysis: What’s the Difference?
  • 19.1. Porter’s 5 Forces vs. SWOT Analysis: An Overview
  • 19.2. Porter’s 5 Forces
  • 19.3. SWOT Analysis
• 20. How Can EV/EBITDA Be Used in Conjunction With the P/E Ratio?
  • 20.1. The EV/EBITDA Ratio
  • 20.2. The Price to Earnings (P/E) Ratio

Tools for Fundamental Analysis

Much of fundamental analysis relies on economic data and central bank policies. Most trading platforms provide some form of economic calendar or research commentary so you’re not flying blind.

Contents:

• 1. What Is Considered a Good Net Debt-to-Equity Ratio?
  • 1.1. The Preferred Debt-to-Equity Ratio
  • 1.2. Why Debt Capital Matters
  • 1.3. Role of Debt-to-Equity Ratio in Company Profitability
• 2. Market Value Of Equity
  • 2.1. What is Market Value Of Equity?
  • 2.2. Understanding Market Value Of Equity
  • 2.3. Calculating Market Value of Equity
  • 2.4. The Difference Between Market Value of Equity, Enterprise Value and Book Value
  • 2.5. Market Value of Equity and Market Profile
• 3. Return on Total Assets (ROTA)
  • 3.1. What Is Return on Total Assets (ROTA)?
  • 3.2. How to Calculate ROTA
  • 3.3. What Does Return on Total Assets Tell You?
  • 3.4. Limitations of Using Return on Total Assets (ROTA)
• 4. Understanding the Time Value of Money
  • 4.1. What Is the Time Value of Money?
  • 4.2. Future Value Basics
  • 4.3. Calculating Future Value
  • 4.4. Present Value Basics
  • 4.5. Calculating Present Value
  • 4.6. Present Value of a Future Payment
  • 4.7. The Bottom Line
• 5. What Is the Intrinsic Value of a Stock?
  • 5.1. Dividend Discount Model
  • 5.2. Residual Income Model
  • 5.3. Discounted Cash Flow
  • 5.4. Why Intrinsic Value Matters
  • 5.5. The Bottom Line
• 6. Decoding DuPont Analysis
  • 6.1. Three-Step DuPont
  • 6.2. The Three-Step DuPont Calculation
  • 6.3. Five-Step DuPont
  • 6.4. The Five-Step Calculation
  • 6.5. Learn the Cause Behind the Effect
  • 6.6. The Bottom Line
• 7. How to Use Enterprise Value to Compare Companies
  • 7.1. Enterprise Value Calculation
  • 7.2. The Role of Debt and Cash
  • 7.3. Enterprise Value Ratios
  • 7.4. The Bottom Line
• 8. How Do You Calculate a Company’s Equity?
  • 8.1. How to Calculate Shareholders’ Equity
  • 8.2. Example of Shareholders’ Equity
  • 8.3. Why Is Shareholders’ Equity Important?
• 9. Valuing Firms Using Present Value of Free Cash Flows
  • 9.1. Free Cash Flows
  • 9.2. Operating Free Cash Flow
  • 9.3. Calculating the Growth Rate
  • 9.4. Valuation
  • 9.5. No Growth
  • 9.6. Constant Growth
  • 9.7. Multiple Growth Periods
  • 9.8. The Bottom Line
• 10. Intrinsic Value vs. Current Market Value: What’s the Difference?
  • 10.1. Intrinsic Value vs. Current Market Value: An Overview
  • 10.2. Intrinsic Value
  • 10.3. Market Value
• 11. Comparable Company Analysis (CCA)
  • 11.1. What Is a Comparable Company Analysis (CCA)
  • 11.2. Understanding Comparable Company Analysis (CCA)
  • 11.3. Comparable Company Analysis
  • 11.4. Relative vs. Comparable Company Analysis
  • 11.5. Valuation and Transaction Metrics Used in Comps
• 12. Degree of Financial Leverage – DFL Definition
  • 12.1. What Is a Degree of Financial Leverage - DFL?
  • 12.2. What Does Degree of Financial Leverage Tell You?
  • 12.3. Example of How to Use DFL
• 13. Free Cash Flow Yield: The Best Fundamental Indicator
  • 13.1. Free Cash Flow
  • 13.2. Free Cash Flow Yield
  • 13.3. Using Free Cash Flow Yield
  • 13.4. Liability Adjusted Cash Flow Yield
  • 13.5. The Bottom Line
• 14. 6 Basic Financial Ratios And What They Reveal
  • 14.1. 1. Working Capital Ratio
  • 14.2. 2. Quick Ratio
  • 14.3. 3. Earnings per Share
  • 14.4. 4. Price-Earnings Ratio
  • 14.5. 5. Debt-Equity Ratio
  • 14.6. 6. Return on Equity
  • 14.7. The Bottom Line
• 15. Basic Earnings Per Share (EPS)
  • 15.1. What is Basic Earnings Per Share?
  • 15.2. Understanding Basic Earnings Per Share
  • 15.3. Basic Earnings Per Share Example
  • 15.4. Impact of Basic Earnings Per Share
  • 15.5. 1. Working Capital Ratio
  • 15.6. 2. Quick Ratio
  • 15.7. 3. Earnings per Share
  • 15.8. 4. Price-Earnings Ratio
  • 15.9. 5. Debt-Equity Ratio
  • 15.10. 6. Return on Equity
  • 15.11. The Bottom Line
• 16. Capitalization of Earnings
  • 16.1. What is Capitalization of Earnings?
  • 16.2. Understanding Capitalization of Earnings
  • 16.3. Determining a Capitalization Rate
  • 16.4. Drawbacks of Capitalization of Earnings
  • 16.5. Capitalization of Earnings Example
• 17. How Is a Company’s Share Price Determined?
  • 17.1. Company Value and Company Share Price
  • 17.2. Predicting a Company’s Share Price
  • 17.3. The Gordon Growth Model
  • 17.4. Example of a Share Price Valuation
  • 17.5. The Bottom Line
• 18. How is the Value of the S&P 500 Calculated?
  • 18.1. The S&P 500 Deconstructed
  • 18.2. Calculating Market Weights
  • 18.3. Free-Float Market Capitalization Methodology
• 19. The Difference Between Return on Equity and Return on Capital
  • 19.1. Return on Equity
  • 19.2. Return on Capital
• 20. How Do Gross Profit and EBITDA Differ?
  • 20.1. What is Gross Profit?
  • 20.2. The Formula for Gross Profit
  • 20.3. What is EBITDA?
  • 20.4. The Formula for EBITDA
  • 20.5. Example of EBITDA Calculation
• 21. How Does Top-Down and Bottom-Up Investing Differ?
  • 21.1. Top-Down
  • 21.2. Bottom-Up
  • 21.3. The Bottom Line
• 22. Which Business Model Is Best? Depends on the Industry
  • 22.1. Direct Sales
  • 22.2. Franchise Model
  • 22.3. Freemium Model
  • 22.4. Subscription Model
• 23. What is the Difference between Revenue and Sales?
  • 23.1. What Is the Difference Between Sales and Revenue?
  • 23.2. Understanding How Sales & Revenue Can Differ
  • 23.3. Non-operating Revenue
  • 23.4. Sales Can Exceed Revenue
  • 23.5. Government Revenue
  • 23.6. The Bottom Line
• 24. Qualitative Analysis
  • 24.1. What is Qualitative Analysis?
  • 24.2. Basics of Qualitative Analysis
  • 24.3. Understanding People and Qualitative Analysis
  • 24.4. Company Culture and Qualitative Analysis
  • 24.5. Gathering Data for Qualitative Analysis
  • 24.6. Qualitative Analysis in Context
  • 24.7. Real World Example of Qualitative Analysis
• 25. Marginal Analysis
  • 25.1. What Is Marginal Analysis?
  • 25.2. How Marginal Analysis Works
  • 25.3. Example of Marginal Analysis in the Manufacturing Field
  • 25.4. Marginal Cost Versus Marginal Benefit
• 26. Revenue vs. Profit: What’s the Difference?
  • 26.1. Revenue vs. Profit: An Overview
  • 26.2. Revenue
  • 26.3. Profit
  • 26.4. Example: Revenue vs. Profit
  • 26.5. Key Differences
  • 26.6. Special Considerations
• 27. Revenue vs. Income: What’s the Difference?
  • 27.1. Revenue vs. Income: An Overview
  • 27.2. Revenue
  • 27.3. Income
  • 27.4. Revenue vs. Income: Example
• 28. Asset Valuation
  • 28.1. What is Asset Valuation?
  • 28.2. Understanding Asset Valuation
  • 28.3. Net Asset Value
  • 28.4. Absolute Valuation Methods
  • 28.5. Relative Valuation & Comparable Transactions
  • 28.6. Real World Example of Asset Valuation
• 29. Debt/EBITDA Definition
  • 29.1. What Is the Debt/EBITDA Ratio?
  • 29.2. What Does the Debt/EBITDA Ratio Tell You?
  • 29.3. Example of Debt/EBITDA and Interpretation

Sectors & Industries Analysis

Learn how to analyze various securities and sectors to determine which companies or industries are best positioned for growth and disruption.

Contents:

• 1. A History Of U.S. Monopolies
  • 1.1. Sherman’s Hammer
  • 1.2. The Benefits of a Monopoly
  • 1.3. The Limitations of a Monopoly
  • 1.4. Clayton Improves Sherman’s Aim
  • 1.5. End of a Monopoly Era?
  • 1.6. The Bottom Line
• 2. Consumer Staples
  • 2.1. What Are Consumer Staples?
  • 2.2. The Basics of Consumer Staples
  • 2.3. The Makeup of the Consumer Staples Sector
  • 2.4. Consumer Staples Financial Performance
  • 2.5. Investing in Consumer Staples
  • 2.6. Real World Example of Consumer Staples
• 3. Duopoly
  • 3.1. What Is a Duopoly?
  • 3.2. Examples of Duopolies
  • 3.3. Real World Example
• 4. Utilities Sector
  • 4.1. What Is the Utilities Sector?
  • 4.2. Paradigm Shift
  • 4.3. Debt Levels of the Utilities Sector
  • 4.4. How Investors Trade Utilities
  • 4.5. Pros and Cons of the Utilities Sector
  • 4.6. Real World Example of Utilities
• 5. The Top 10 Technology Companies
  • 5.1. What Is the Utilities Sector?
  • 5.2. Apple
  • 5.3. Samsung
  • 5.4. Microsoft
  • 5.5. Alphabet
  • 5.6. Intel
  • 5.7. IBM
  • 5.8. Facebook
  • 5.9. Hon Hai Precision
  • 5.10. Tencent
  • 5.11. Oracle
• 6. Fast Fashion
  • 6.1. What Is Fast Fashion?
  • 6.2. Fast Fashion Leaders
  • 6.3. The Advantages of Fast Fashion
• 7. Fast-Moving Consumer Goods (FMCG)
  • 7.1. What Are Fast-Moving Consumer Goods (FMCG)?
  • 7.2. Understanding Fast-Moving Consumer Goods (FMCG)
  • 7.3. Special Considerations
• 8. Vertical Market
  • 8.1. What Is a Vertical Market?
  • 8.2. Real World Example
• 9. Growth Industry
  • 9.1. What is a Growth Industry?
  • 9.2. Characteristics of Growth Industries
  • 9.3. Example of a Growth Industry
• 10. Industry vs. Sector: What’s the Difference?
  • 10.1. Industry vs. Sector: An Overview
  • 10.2. Industry
  • 10.3. Sector
• 11. Cross-Sectional Analysis
  • 11.1. What is Cross-Sectional Analysis?
  • 11.2. How Cross-Sectional Analysis Works
  • 11.3. The Difference Between Cross-Sectional Analysis and Time Series Analysis
  • 11.4. Examples of Cross-Sectional Analysis
• 12. 10 Major Companies Tied to the Apple Supply Chain
  • 12.1. Apple’s Efficient Supply Chain
  • 12.2. Analog Devices (ADI)
  • 12.3. Glu Mobile (GLUU)
  • 12.4. Jabil Circuit (JBL)
  • 12.5. Micron Technology (MU)
  • 12.6. Murata Manufacturing Ltd.
  • 12.7. Nidec
  • 12.8. Qualcomm (QCOM)
  • 12.9. Samsung
  • 12.10. STMicroelectronics (STM)
  • 12.11. Texas Instruments (TXN)
  • 12.12. How Does Apple Benefit?
• 13. Industrial Production Index (IPI)
  • 13.1. What Does Industrial Production Index Mean?
  • 13.2. Understanding Industrial Production Index (IPI)
  • 13.3. How IPI Is Calculated
  • 13.4. How to Interpret IPI
  • 13.5. Historical Data
  • 13.6. What is Cross-Sectional Analysis?
  • 13.7. How Cross-Sectional Analysis Works
  • 13.8. The Difference Between Cross-Sectional Analysis and Time Series Analysis
  • 13.9. Examples of Cross-Sectional Analysis
• 14. Tertiary Industry
  • 14.1. What is the Tertiary Industry?
  • 14.2. Breaking Down Tertiary Industry
  • 14.3. Examples of Tertiary Industry Organizations
  • 14.4. Pricing Challenges in the Tertiary Industry
  • 14.5. Transition From Tertiary to Quaternary
  • 14.6. Who Has the Highest Output of Tertiary Services?
• 15. Sharing Economy
  • 15.1. What is the Sharing Economy?
  • 15.2. Understanding the Sharing Economy
  • 15.3. The Sharing Economy is Evolving
  • 15.4. Current Criticisms of the Sharing Economy
• 16. The Top 10 Biotechnology Companies (JNJ, ROG.VX)
• 17. How Exactly Do Movies Make Money?
  • 17.1. Movie Budgets and Costs
  • 17.2. Ticket Price Revenue
  • 17.3. Merchandising Dollars
  • 17.4. Foreign Sales
  • 17.5. Television Rights, Streaming and VOD
  • 17.6. The Bottom Line
• 18. The 5 Industries Driving the U.S Economy
  • 18.1. 1. Health Care
  • 18.2. 2. Technology
  • 18.3. 3. Construction
  • 18.4. 4. Retail
  • 18.5. 5. Nondurable Manufacturing
  • 18.6. The Bottom Line
• 19. Prime Costs vs. Conversion Costs: What’s the Difference?
  • 19.1. Prime Costs vs. Conversion Costs: An Overview
  • 19.2. Prime Costs
  • 19.3. Example of How Prime Costs Work
  • 19.4. Conversion Costs
  • 19.5. Example of How Conversion Costs Work
• 20. Evaluating Pharmaceutical Companies
  • 20.1. What Is the Pipeline and Why Does It Take So Long?
  • 20.2. The Importance of Pending Drug Developments
  • 20.3. A Troubling Symptom
  • 20.4. Considering Start-Up Pharma Opportunities
  • 20.5. The Long-Term Prognosis
  • 20.6. The Bottom Line
• 21. Blue Ocean
  • 21.1. What Is Blue Ocean?
  • 21.2. How Blue Ocean Works
  • 21.3. Examples of Blue Ocean Strategies
• 22. The Top 10 Technology Companies
• 23. Consumer Discretionary
  • 23.1. What is Consumer Discretionary
  • 23.2. BREAKING DOWN Consumer Discretionary
  • 23.3. Consumer Discretionary as an Economic and Stock Market Predictor
  • 23.4. Consumer Discretionary and Interest Rates
• 24. In which industries is Average Collection Period most important?
  • 24.1. Average Collection Period
  • 24.2. Types of Industries and Accounts Receivable Management