summary
Fundamental analysis is a method to see the "true value" of a company. Three perspectives are particularly important: profit, affordability, and growth potential. In this article, you will learn about typical indicators and how to use them in making actual investment decisions.
Heading ① What are fundamentals?
Conclusion: How to judge a company's ability through numbers
Fundamentals in a nutshell → “Corporate economic basic data”
Specifically, we will analyze the following:
- sales
- profit
- assets
- debt
- cash flow
why is it important
Stock prices fluctuate in the short term, but in the long term they converge to the corporate value.
example
- A company whose profits continue to grow → stock prices tend to rise
- A company that continues to be in the red → stock prices tend to fall
Headline ② Three indicators that you should watch at least
Conclusion: The general picture can be determined based on PER, ROE, and sales growth rate
① PER (Price Earnings Ratio)
One word: Undervalued stock price Details: Stock price ÷ Earnings per share
- Low → Possibility of being cheap
- High → Growth expectations are high
② ROE (Return on Equity)
One word: capital efficiency Details: Profit ÷ Equity
- Expensive → A company where you can earn money efficiently
- Low → Not making full use of funds
③ Sales growth rate
One word: growth potential Details: Sales growth compared to previous year
- High → Expanding company
- low → mature or stagnate
mini comparison table
| indicators | what do you know | way of seeing |
|---|---|---|
| PER | Value for money | The lower the price, the cheaper it is. |
| ROE | efficiency | The higher the better |
| sales growth rate | growth potential | The higher the better |
Heading ③ Common misconceptions and precautions
Conclusion: It is important not to judge in isolation
Misconception 1: Low PER = good value
→ In reality, there is a possibility that the company will not grow.
Misconception ② High ROE = excellent company
→ In some cases, it's just a matter of having a lot of debt.
Misconception 3: High growth rate = safety
→ There is a possibility that the deficit will increase
Correct usage
Combine multiple indicators:
- Low PER × Growth → Promising
- High ROE × Stable profit → Excellent
- High growth rate × Profit → Growth stock candidate
Heading ④ Practice: How to use it for investment decisions
Conclusion: Use in the order of screening → comparison → judgment
step
① Narrow down by conditions
- PER: 10-20x
- ROE: 10% or more
② Comparison with other companies in the same industry
- Compare to industry average
③ Make decisions from a long-term perspective
- Don't be fooled by temporary numbers
Practical tips
- View yearly instead of quarterly
- Don't rely on one metric
- View trends (improvement or deterioration)
Summary
- Fundamentals are an analysis that looks at a company's capabilities.
- Important indicators are "PER, ROE, and sales growth rate"
- It is important to judge in combination rather than individually.
Action:
- First, check the PER and ROE of the company you are interested in.
- Compare with other companies in the same industry
- Get into the habit of following “changes” in numbers