Important aspects of a company fundamental analysis
It is necessary, above all, when we invest in the long term, make a deep analysis of the companies or Assets in which we invest. Rather, we’re interested in investing if our analysis so determines. There are very important aspects to keep in mind as mentioned below:
In English would be the market capitalization. This is the total value of the company. That is to say, it is the sum of the value of all of the outstanding shares of a company, in dollars. Can be made in euros in the case of companies listed on European stock exchanges, and each region has its currency.
This data is found on any financial portal such as market cap
This value is calculated by multiplying the total number of outstanding shares by the price of each share.
For example, if the company abc has to 300,000 shares at a value of u$s 15 each, its market cap is: 300.000×15= 4.500.000 dollars.
The market cap is a measure of the importance of a company, since companies with market capitalization higher have much greater weight in the indices stock.
Don’t confuse market cap with a measure of the future performance of the company. It is only a measure of the total value, therefore a company with a large market cap is not necessarily a better investment in the long term. Just gives us an idea of the size of a company.
It is necessary to check if the company you’re analyzing have business plans that will enable it to maintain its leadership and competitiveness in the market that is in constant change. Many companies have gone to become obsolete to their plans and have not been able to adapt to the changes that have been happening.
The aspects that we must analyze are:
the ability of adaptation to changing the socio-cultural, demographic and economic current and future
the agreements you may have with potential suppliers and customers, with other countries so that it is a business more competitive and global.
the incorporation of new technologies to their business, to not fall behind of your competition and stay in the market.
Competition and alliances
Analyze the competition serves to understand the extent to which the company has a presence in your sector and industry and how a leader or is not. This allows us to predict or determine if you can maintain at the time.
Currently many companies make strategic alliances with others in the sector to be strengthened in the market and exploit new opportunities.
We have to be aware of this type of alliances already in the bag, when they produce this type of partnerships, are generally valued the company’s shares purchased and devalues a little of the acquiring party. However in the long term, the two are strengthened. Not always the case, many times when there are mergers or alliances, the stock can be valued or not, the of both or one, depending on the case. Beyond that happens, it’s interesting to see what the reaction of investors to the news of this type of alliances.
The companies each quarter must give information of their financial statements and their economic prospects for the following months. Is known as the period of earnings on the new york stock exchange, as all companies must do so.
Before the time of earnings, are posted on the websites of financial dates, times, and eps (earnings per share) estimates for the quarter that corresponds. The estimates of the earnings-per-share mean that is what it is estimated they can earn in dollars for each action that have investors, in that quarter. This is an estimate, because it is a fact that is given in the report of earnings in a conference published, that every company has its day and time to give.
The achievement or not of this output estimate generated by a change in the price of the shares of a company. Many times, these changes to the few minutes that it knew the result and depending on how the price will go up or down.
The CEO of a company is very important for investors. According to the results of the management of the CEO, the investors accept or reject what that generates as a consequence the listing of the shares to be affected.
For example, the resignation of a CEO very much accepted you can generate rejection and a drop in the share price, especially if the one who replaced her is not accepted or wanted by investors. Or it may be the opposite case, leading to a rise in the price of its shares.
It is important to be aware who are the directors of a company, this information is all portals of financial statements, and if changes are expected in some of the posts.
Patents and licenses
Patents are an asset of the company as they represent their ownership over an invention that has been developed by the company.
Licenses are required for their operation since they are the state permits they need for the production and commercialisation processes.
These licenses must be renewed every certain amount of time to continue operating normally. When this is not given by some problem, may be seriously compromised and investors see it as a bad sign, selling its shares and causing a decrease in your quote. For this reason, it is important to consider that licenses and patents the company has in the you want to invest in and in which state are the same.
The demand that is a product of a company is related to the forecast of sales that the company has for that product. Therefore, it is important to analyze it, because that estimate or predict the sales you may have the product or service and this gives evidence of whether the company is in growth or not.
This fact we know when the companies present these estimates, based on the volume of quarterly sales, and in addition to what is presented in their marketing plans when they give the conference earnings.
History of the company
The history of an organization you are interested in investors because in it you can see all the relevant aspects of the same. How it was created, what was the initial idea, and all of its performance since it was founded. In addition, the story shows how they were developing products or services that you sell, which were year-to-year levels of sales, profits and losses, the legal status, among other things.
When investors want to invest for the long term, it is very important to pay attention to the history of the company, since you can analyze what is mentioned above and thus to take investment decisions more successful. For example, if a company drags many legal problems, it is more likely that its price falls, which would make the investors that are looking do not look at it or discard it and look for a better one.
A business model is the way in which a company seeks to generate benefits. It is a summary of the planning that the company has to achieve its benefits, detailing how to serve their customers, and detailing both its strategy as its implementation. What makes the business model of a company is to reflect the structure of the same. It must include:
profile of clients
differentiation of the product
collection and retention of clients
strategies of distribution of products
how to create utility for customers
What interests us as investors is to analyze if the business model that the company has can be durarero in time, if you have differences competitive, if they have diversified income or products, etc.
Macroeconomics and the current situation
What happens in the world economy is important and is reflected in the stock market. The stock price is susceptible to events macroeconomicos, and these events can generate a great impact on them. For example, in the recession of 2008 nearly all of the companies listed on the new york stock exchange were affected by that crisis, which caused many stocks to fall. that is not devalued by a poor performance of his party but because of the economic situation.
Also news affect day-to-day what happens in the bag, that is why it is important to be aware of what is happening in the global economy in general.