Helping You Build Wealth With Honest Research
Since 1996. Try Now


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

An Emerging Opportunity for Investors
India's Lithium Megatrend

**Important: We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
**By submitting your email address, you also sign up for Profit Hunter, a daily newsletter from Equitymaster
covering exciting investing ideas and opportunities in India.


What is Fundamental Analysis and How to Do It?

Fundamental analysis has been one of the most rewarding analyses in the history of stock markets.

Fundamental analysis is a method of evaluating the intrinsic value of an asset, such as a stock, by examining its underlying economic and financial factors.

It helps in determining the fair value of any stock. It also evaluates the health and performance of an organisation with the help of its financial and major economic indicators.

How should you go about fundamental stock analysis?

  1. Understanding the company - It is important to understand the company you intend to invest in. It will give you further insights into how the company is performing, and whether it’s taking the right decisions.
  2. Review the financial statements - Analysing the company's financial statements, including the balance sheet, income statement, and cash flow statements gives an idea about the financial performance of the company over the years.
  3. Check for debt - Debt is one of the important factors which can bring down a company’s performance. Security cannot perform well and reward you if it has a huge debt to pay. Think about the dividends you’ll enjoy after investing in debt free companies.
  4. Analyse future prospects - Fundamental analysis is most effective when you want to stay invested for the long-term. Thus, invest in those companies whose products will still be useful 15-25 years down the line. The company should have a solid moat and longevity for its products.
  5. Evaluate economic indicators - Consider the macroeconomic factors that may impact the company's future earnings potential, such as interest rates, inflation, and GDP growth.
  6. Analyse industry trends - Research the industry trends to identify risks/opportunities.

Let’s understand more on this topic with a company’s example - Hindustan Unilever (HUL).

HUL's financial statements have shown consistent revenue and earnings growth, high profit margins, and a strong balance sheet with low debt levels and high cash reserves.

The FMCG company’s management team has a strong track record of successful leadership and has consistently delivered growth and shareholder value.

HUL has a strong portfolio of brands, including popular household names like Dove, Surf Excel, and Lipton. The company also has a wide distribution network that reaches a large consumer base across India.

It operates in the highly competitive FMCG industry in India, which is characterized by rapidly changing consumer preferences and intense competition. HUL has a history of successfully adapting to these changes and introducing new products to meet evolving consumer demands.

HUL's growth is influenced by macroeconomic factors such as inflation, interest rates, and economic growth in India.

This is how you should go about fundamental analysis and study the company in detail. The example of HUL illustrates how fundamental analysis can be applied to a real-world company.

HDFC Bank Share Price at a Crossroads. Buy, Sell, or Hold?

Sep 21, 2023

The stock is currently trading at a do-or-die level of Rs 1,500 on the weekly chart, as multiple technical parameters signal the last chance for bulls.

A Bird's Eye View of Dixon Technologies Does Not Look Good

Jul 10, 2023

What does a 10,000-foot view of Dixon Technologies look like?

Why KRBL Share Price is Falling

May 31, 2023

Despite growing competition, KRBL has stayed ahead of peers by diversifying into new segments.

Can this Large Cap Be Crowned the 'ITC of 2023'?

Oct 29, 2022

Rahul Shah on a large cap that can turn into the 'ITC of 2023'

I didn't Recommend Zomato Because of this...

Aug 12, 2022

Rahul Shah on whether Zomato is an easy or a difficult business to analyse.

What Will Make You Rich Faster: Investing or Trading?

Jul 9, 2021

Rahul Shah on whether trading or investing will make you a millionaire faster.

Buyback: What should a retail investor do?

Mar 3, 2011

Equitymaster discusses the courses of action for retail investors with respect to buybacks.

Dixon Tech Up 60% in 6 Months. More Gains Ahead?

Jul 15, 2023

Has the risk-reward of investing in Dixon still in favour of investors?

PVR INOX: Has the Correction Created a Big Opportunity?

Jun 2, 2023

Has the risk-reward of investing in PVR INOX turned in the favour of investors?

How Much More Can Divis Labs Fall?

Nov 10, 2022

Is this a good time to buy Divis Laboratories?

ITC in 2023: A New High or a Big Crash?

Oct 11, 2022

Rahul Shah on whether ITC is headed for a big crash in 2023.

How to Select Fundamentally Strong Stocks? Here's a Guide

Jan 14, 2022

Sound financials aren't enough to select fundamentally strong stocks. You will have to consider these parameters as well.

From Multi-Baggers to Filthy Beggars!

Jul 27, 2016

What happens when you ride multi-baggers that are driven by 'stories' but not by sound fundamentals...