Fundamental analysis is the study of a company’s financial health. Unlike technical analysis, it examines earnings, assets, and liabilities.
**Key aspects of fundamental analysis**
– **Earnings per share (EPS):** Higher is generally better.
– **Price-to-earnings ratio (P/E):** Valuation metric.
– **Debt-to-equity ratio:** Lower ratios mean safer balance sheets.
– **Cash flow:** Tracks liquidity.
**Qualitative factors**
– Experience and track record.
– Barriers to entry.
– Brand value and reputation.
**Examples**
– **Apple:** Strong earnings, cash flow, global brand.
– **Coca-Cola:** Reliable dividends, global reach, warner bros discovery trading defensive industry.
– **Tesla:** Innovative yet volatile.
**Limitations**
– Not always predictive.
– Patience is required.
**Conclusion**
Fundamental analysis is the backbone of value investing. By studying earnings, ratios, and industries, investors invest with confidence.
