Online Financial Tools
Articles to Read
What is fundamental analysis of stocks?
Fundamental analysis of stocks is a method used by investors and analysts to evaluate a company’s intrinsic value and assess its long-term growth potential. It involves examining the company’s financial health, competitive position, and the economic factors that may impact its performance.
Key Elements:
- Analyzing financial statements like income statements, balance sheets, and cash flows.
- Evaluating key financial ratios (EPS, P/E ratio, ROE, etc.).
- Understanding qualitative factors such as management quality and industry trends.
In summary: Fundamental analysis focuses on understanding “what a company is worth” based on data and logical projections. It contrasts with technical analysis, which focuses on price trends and market patterns.
What is the intrinsic value of a stock?
Intrinsic value of a stock is the perceived or calculated true value of the stock based on objective data and analysis, rather than its current market price. It reflects the actual worth of a company based on its financial performance, assets, and growth potential.
Key Factors to Calculate Intrinsic Value:
- Discounted Cash Flow (DCF): Projects future cash flows and discounts them to their present value.
- Dividend Discount Model (DDM): Values a stock based on expected future dividend payments.
- Assets and Liabilities: Analyzes the company’s balance sheet for net worth.
In summary: Intrinsic value helps investors determine whether a stock is overvalued or undervalued and is a core concept in value investing.
How can getaka.co.in help you find good stocks?
Getaka.co.in is a comprehensive platform designed to help you make informed investment decisions by providing tools and resources for analyzing stocks. Here’s how it can assist you:
- Stock Analysis Tools: Access advanced tools like stock screeners, SIP calculators, and CAGR calculators to evaluate stocks effectively.
- Educational Articles: Read in-depth articles explaining key financial concepts, market trends, and stock valuation techniques.
- Fundamental Analysis: Find detailed breakdowns of fundamental analysis for top-performing and undervalued stocks.
- Customized Solutions: Explore tools tailored for Indian investors, focusing on the local market and investment strategies.
- Regular Updates: Stay updated with the latest market trends, stock recommendations, and expert insights.
Whether you’re a beginner or an experienced investor, getaka.co.in offers the resources you need to identify high-potential stocks and build a robust investment portfolio.
How to Purchase Stock in India
Purchasing stock in India is a straightforward process if you follow these steps:
- Open a Trading and Demat Account: A trading account allows you to buy and sell stocks, while a Demat account holds your shares in electronic form.
- Complete KYC (Know Your Customer): Provide identity proof (PAN card, Aadhaar, etc.) and address proof during the account opening process.
- Fund Your Trading Account: Transfer money from your bank account to your trading account to start purchasing stocks.
- Choose the Stocks You Want to Buy: Use platforms like Getaka.co.in for research, stock analysis, and tools to evaluate stocks.
- Place an Order: Use your trading platform to place a buy order.
- Monitor and Manage: Keep track of your investments and manage your portfolio for optimal returns.
With the right platform and knowledge, purchasing stocks in India becomes a seamless and rewarding process. Make sure to stay updated and invest wisely!
Frequently Asked Questions (FAQs)
1. How do you fundamentally analyze a stock?
To fundamentally analyze a stock, follow these steps:
- Study the company’s financial statements (income statement, balance sheet, and cash flow).
- Evaluate key financial ratios like P/E ratio, ROE, and D/E ratio.
- Analyze qualitative factors such as management quality, competitive position, and market trends.
- Understand the company’s growth potential in its industry.
- Use valuation models like Discounted Cash Flow (DCF) or Dividend Discount Model (DDM).
2. How to check if a stock is fundamentally strong?
A fundamentally strong stock has:
- Consistent revenue and profit growth over time.
- Low debt levels compared to equity (low D/E ratio).
- Good return on equity (ROE), preferably above 15%.
- Strong cash flow and a sustainable business model.
- Competitive advantages like market leadership or patents.
3. What are the five steps of fundamental analysis?
The five steps of fundamental analysis are:
- Understand the business and its industry.
- Analyze the company’s financial performance.
- Evaluate management and qualitative factors.
- Compare key financial ratios with industry peers.
- Use valuation methods to determine intrinsic value.
4. What PE ratio is good?
A good Price-to-Earnings (P/E) ratio depends on the industry and market conditions. Typically:
- P/E ratio between 15-25 is considered reasonable for most companies.
- A lower P/E ratio (<15) may indicate undervaluation, but it could also signal poor growth prospects.
- A higher P/E ratio (>25) may indicate overvaluation or strong growth potential.
5. How to pick a good stock?
To pick a good stock:
- Choose companies with strong financials and consistent earnings growth.
- Look for a sustainable business model with a competitive advantage.
- Check key financial ratios like ROE, ROCE, and P/E ratio.
- Analyze the company’s debt levels (low D/E ratio is preferable).
- Ensure it operates in a growing or stable industry.
6. Which stock grows very fast?
Fast-growing stocks, also known as growth stocks, typically belong to companies with high revenue and profit growth. These include:
- Technology companies (e.g., software, AI, cloud computing).
- Companies in emerging markets or industries.
- Innovative businesses with new products or services.
However, fast-growing stocks often carry higher risks due to high valuations or market volatility.
7. Which stock is always increasing?
No stock always increases in value due to market fluctuations. However, stocks like those of companies with strong fundamentals, such as Infosys or TCS, have shown consistent growth over time.
8. Which stock gives more profit?
Stocks in high-growth sectors, such as IT and pharmaceuticals, have historically provided higher profits. For instance, Reliance Industries and HDFC Bank have been among the top performers in India.
9. What is the most successful stock of all time?
Globally, stocks like Apple and Amazon are among the most successful:
- Apple: A $1,000 investment in Apple during its IPO in 1980 would be worth over $1 million today, thanks to its dominance in the tech industry and consistent innovation.
- Amazon: A $1,000 investment in Amazon during its IPO in 1997 would now be worth over $1.6 million, driven by its leadership in e-commerce and cloud computing.
In India, HDFC Bank and Reliance Industries have been long-term wealth creators:
- HDFC Bank: ₹10,000 invested during its IPO in 1995 would now be worth over ₹1.5 crore, reflecting its consistent performance and market leadership in the banking sector.
- Reliance Industries: ₹10,000 invested during its IPO in 1977 would now be worth over ₹2.5 crore, making it a hallmark of long-term investment success in India.
These stocks showcase the unparalleled returns achievable through long-term investment in innovative and market-leading companies.
10. Which stock gave the highest return?
In India, stocks like Wipro, Infosys, and TCS have provided massive returns over decades:
- Wipro: ₹10,000 invested in Wipro in 1980 would have grown to over ₹800 crores by 2020, making it one of the best-performing stocks in Indian history.
- Infosys: ₹10,000 invested in Infosys IPO in 1993 would be worth over ₹3 crores today, owing to its consistent growth in the IT sector.
- TCS: Since its IPO in 2004, TCS has delivered approximately 25x returns, turning ₹10,000 into ₹2.5 lakhs over two decades.
These stocks demonstrate the power of long-term investment in companies with strong fundamentals.
