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Fundamental analysis

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Conducting a fundamental analysis of a share is not the easiest thing to do for new investors,but an assessment of the quantitative and qualitative factors of stock can serve as a toolbox for helping answer the question: Is this company"s stock a good investment? The intent of this article is to teach basic principles of how to analyze a stock.This is not an exhaustive guide but is meant to serve as a cheat sheet to the fundamental language and thought process behind stock analysis. Because MoneysaverSA has the ambition of making its users fluent in the language of finance-relevant terms are defined through  this article. Throughout  this article, when we refering a stock, we are speaking to all stocks and shares into which ownership of the publically traded company is divided.

EPS

The first thing to evaluate when looking at a stock is the Earning Per Share(commonly referred to as EPS). EPS is generally considered to be the most important variable in dertemining a share price for a company. We will use MoneysaverSA Investing Dictionary,which defines the terms "shares" and Earning Per Share" in the following:

SHARES

  1. Shares- A unit of ownership interest in a corporation. These days,share ownership is recorded electronically. Owning shares in a corporation is achieved by purchasing a share of that corporation"s stock......................                     

EPS

2. An indicator of a company"s profitability. The EPS is an important fundamental used to evaluate a company because it breaks down a company"s profits on a per share basis. Investors  care about EPS because by dividing a company"s share price by the Earnings Per Shares an investor can dertemine  the fair market value of a stock in terms of what the market is willing to pay based on a company"s current earnings.

PROFITABILITY ANALYSIS

Now that we have an understanding of what EPS means, we can eveluate a potential stock investment by asking  the following:

1-EPS TO EPS

  1. Compare the current EPS to the EPS  from the same quarter last year. Has EPS growth occured? Is that EPS growth significant?                                                     

2-EPS GROWTH

Is there a Pattern of Positive EPS growth?

3-EPS GROWTH OUTPERFOMING

Has the company"s EPS growth outperfomermed the S&P 500 INDEX? NOTE: you can find data on the S&P 500 index by searching for the ticker SPX)

4-INCOME GRWOTH

How does the company"s EPS growth compare with the rest of the industry average?

5-GROWTH PERCENTAGE

Has the net income growth percentage increased compared to the same quarter last year?

6-GROSS PROFIT MARGIN

What is the company"s gross profit margin? What is the company"s net profit margin?How do these margins compare with the industry average?

AS AN EXAMPLE

Lets evaluate the EPS and other profitability measures of Amazon or SATRIX or AAPL etc measures of Amazon (AMZN) based on the above criteria. NOTE: We use a number of sources to obtain current and historical data,though we generally get data from www.marketwatch.com ,Yahoo Finance, Y charts,and CSI Market. It is good to check out the company"s annual SEC fillings such as the form 10-K, which is a required annual report providing a comprehensive overview of the company for the past year. Based on the historical data from MARKETWATCH,we can see that EPS for AMZN has increased from 41 on June  30th,2017 (same quaerter last year- Q2 2017) to 5.21 on June 30th,2018. This is significant growth as it represents an increase in EPS of 1170% during that time. We can also tell from this data there is a pattern of positive EPS growth.

TYPES OF STOCKS
TYPES OF STOCKS