December 26, 2011 11:42 pm
Will you plz let me know what key ratios(tools) which we can use for fundamental analysis as well as value-investment of Stocks for Longtem Investment of 5-10 years.
Dear E Viswanath, now start investing your time to understand each of these ratios & their importance in the analysis.
Hi, After googling, i found below key ratios which we can use for fundamental analysis. Let me know if i missed any Key Ratio(s) from below list. Your comments are most welcome.
Tools of Fundamental Analysis:
Earnings per Share (EPS)
Price to Earnings Ratio (P/E)
Projected Earning Growth (PEG)
Price to Sales (P/S)
Price to Book (P/B)
Book value per share
Return on Equity / Return on Net worth (RONW)
Debt Equity ratio
Reserves and Ploughback
Net Profit Margin
Dividend Payout Ratio
Viswanath – You can easily get to read about all of these ratios based on the abundant data available at ease these days. The problem with these ratios is that they are easy to manipulate for companies. While a good starting point you cannot pick and retain stocks only by seeing ratios.
To get a holistic view of how to go for value picks just grab the book “The Intelligent Investor” by Benjamin Graham. If you read it even once the daily fluctuations in the market will not haunt you much, you will be more level-headed and what more – you will start to have an eye for value picks.
Fundamental analysis is not as simple as formulae driven in which case a simple pivot table in excel will pick the value stocks from the universe of stocks. It goes much deeper – the journey in itself is much rewarding. Good luck and would appreciate if you can come back to the forum after 6 months to tell us where you have gotten.
Dear E viswanath, here are some ratios, you may start with, PE, PEG, PBV, RoCE, RoE, EBIDTA, OPM, This is an indicative list only & not the final one. There may be seceral more parameters, ratios to judge analyze.
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