Module 3: Fundamental analysis
Reading a company rather than its chart: the annual report, the three financial statements, the ratios that matter and how value is estimated.
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Fundamental analysis asks what a business is worth and whether its price makes sense against that. It is slower than chart reading and suits investors who hold for months or years.
01The investor's mindset
A fundamental investor buys part of a business. The questions are about the business: what it sells, who buys it, how it makes money and whether that can last.
02The annual report
The annual report is the company's own account of the year: the business, the management's discussion, the financial statements and the notes beneath them. The notes often hold the details that matter.
03The profit and loss statement
It shows revenue, the costs of earning it and the profit left over. Growth in revenue and the margin kept from it are the first things to read.
04The balance sheet
It lists what the company owns and what it owes on one date. Debt, cash and how much of the business belongs to shareholders all come from here.
05The cash flow statement
Profit is an accounting figure; cash is what actually came in and went out. A business that reports profit but never generates cash deserves a closer look.
06Financial ratios
Return on equity, debt to equity, margins and asset turnover turn the statements into comparisons across years and against competitors.
07Valuation ratios
Price to earnings, price to book and EV to EBITDA compare the price with what the business earns or owns. A ratio means little alone; it means more against the company's history and its peers.
08Estimating intrinsic value
A discounted cash flow model estimates value from the cash a business may generate in future. It is only as good as its assumptions, so the margin of safety matters as much as the answer.
09A checklist before buying
Understandable business, steady growth, sensible debt, honest management and a price that leaves room for error. A checklist slows decisions down in a useful way.
10Where this leads
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