No matter whether you are trading for short term or longterm, it is wise to research on fundamentals of a companybefore investing. Now the question would be what you shouldlook for in Fundamentals? Here are five key factors to look forwhile checking fundamentals of a company:
- Check the trend of Earnings, Compare it on quarterly basis and see how the trend is whether increasing or decreasing.
- Have a close look at Revenues or Sales of the company as it would very well throw a clear picture as to whether the company is performing well or not.
- For any business to survive or expand it is imperative that the profit margin of the company is above industry average and in increasing trend.
- The next factor to be analyzed is Price-to-Earnings ratio. Usually stocks with higher P/E ratio are considered as expensive stocks.
- The fifth factor is Price-to-book ratio. It compares market value of a company to the book value and enables investor to know the residual value of the company.