How To Analyze Stock Market Fundamentals And Indicators

Stock fundamental analysis is a stock analysis method that looks at a company’s overall performance to determine the long-term upside potential of a stock’s price. Fundamental analysis of stocks is carried out by analyzing macro- and microeconomic conditions, including financial statements and the conditions of similar industries.

Unlike technical analysis, which is often used in short-term stock trading, long-term stock investors use fundamental stock analysis for over a year. Technical analysis predicts stock prices by looking at historical data and patterns of stock price and volume movements.

Two main methods of stock analysis

How To Analyze Stock Market Fundamentals And Indicators

Two approaches can be used to conduct fundamental analysis of stocks. The first is a top-down or top-down approach. The second is ascending, that is, this method is opposite to descending.

Basic analysis of stocks from top to bottom.

The top-down approach first looks at the macroeconomic situation, then looks at the major business segments, and then analyzes the company’s financial performance.

Why is it necessary to study the macroeconomic situation? This is due to the fact that macroeconomic conditions have a significant impact on the performance of capital markets and corporate shares. Some of the commonly analyzed macroeconomic conditions may be fiscal and monetary, such as gross domestic product (GDP) development, unemployment, inflation, taxes, and interest rates.

Find out which types of economic policies can benefit a particular industry sector. For example, the government’s efforts to increase the budget for infrastructure development will certainly lead to an increase in the participation of construction companies. So, fundamental analysis from top to bottom is carried out as follows:

1. Macroscopic analysis to determine the general economic situation in the country, such as economic growth rate, inflation rate, investment and unemployment rate. A good economy will support corporate earnings growth.

2. Analysis by industry or industry to determine the status of each industry. It is necessary to know which industries may have great opportunities in the future.

3. Microanalysis to determine the state of the business by examining the financial statements of the business.

Fundamental analysis of stocks from the bottom up

Second analysis from bottom to top. Fundamental analysis of stocks from the bottom up means that the analysis is carried out from the bottom up. With this methodological approach, you must initially select target actions by reviewing the results of operations or financial statements.

Only then will we analyze the macro and micro trends and decide whether to collect shares in the long term compared to the performance of similar sectors of the industry, including corporate governance. In this way, you can find out whether the price of the issued shares truly represents the full potential value and risk of the company.

Important economic indicators in basic stock analysis:

> Political factors. Political events affect exchange rate fluctuations, taxes and government spending.

> Fiscal and monetary policy. Changes in monetary and fiscal policies by governments and central banks change interest rates in ways that significantly affect changes in fundamental economic factors such as exchange rates.

> Global economic development Changes in the global economy can have national implications. This is especially true in an era of global asset allocation, where the flow of capital portfolios no longer recognizes boundaries.

> National economic factors.

1. Key indicators include gross domestic product (GDP). This GDP shows the level of productivity of the country and the growth of its economy.

2. The rate of inflation. Inflation is caused by a change in the money supply. Well, one way to deal with inflation is to pursue a policy of raising interest rates.

3. The trade balance is the difference between the total volume of exports and imports of goods, services, etc. This is important because it reflects the competitiveness of the exporting country.

4. The influx of foreign capital in both direct and indirect investments. Direct investments are usually long-term investments, while indirect investments are associated with investments in financial instruments, such as investments in the capital market.

5. Unemployment. As an index that can understand the actual state of various sectors of the economy, it can be used as a tool to analyze the strength of the national economy. When the economy is good, the unemployment rate is low.

6. Exchange rate. This exchange rate is often used as a key indicator of a country’s economic strength and level of economic stability. If the exchange rate is too weak, the company’s ability to import raw materials and pay its debts is also weakened.

Sources of basic information on reserves analysis

There are many reliable sources of information that you can refer to when doing basic stock analysis. You need to know not only information showing the movement of stock prices, but also information about the company’s activities, including financial performance, company history and macroeconomic conditions.

Website of the Indonesian Stock Exchange

Up-to-date information on public companies can be found on the website of the Indonesian Stock Exchange (www.idx.co.id). This site has been significantly updated as stock exchange rules require each issuer to first provide the stock exchange with important information about their shares. You can display information in the following format:

> Quarterly and annual financial reports

> Annual report. Issued once a year.

> Opening hours of supermarkets and public exhibitions.

> Company Brochure

> Company Disclosure Report.

> Issue of company shares

> Disentangle market rumors that affect share prices.

official website of the company

In addition to the stock exchange site, you can also access extensive information on the official site of the issuer. In general, companies publish a well-managed Investor Relations section on their websites. There is a lot of information that can be taken, including an explanation and description of the activity and development of the company.

Bank of Indonesia Website

To see the latest economic and monetary developments, you can access them on the Bank Indonesia website (www.bi.go.id). You can get information on the rupiah exchange rate, BI benchmark interest rate, Indonesia’s balance of payments and economic projections.

Central Bureau of Statistics (BPS) website

Also del site web de Bank Indonesia (BI), el site web de BPS (www. .bps.go.id) can update the economic evolution from the cifras del GDP, the tasas de desempleo, the inflation y mucha otra information . BPS is the unified official body authorized to administer and publicize statistical data in Indonesia.

Reliable noticias site

Stocks are a type of investment heavily influenced by rumors and news. This is due to the fact that fluctuations in stock prices in the news for fundamental analysis do not attract much attention. However, for reference and knowledge, you can read various reliable business media such as KONTAN, Bisnis Indonesia, CNBC, etc.

Benchmarks in basic stock analysis

To do fundamental analysis, we need to look at specific benchmarks and indices that can explain a company’s performance, financial health, stock market benchmarks, and future outlook.

Examines financial statements for a period of 3 to 5 years. Financial reporting is the key to fundamental analysis. Therefore, they are able to read and analyze the company’s financial statements.

Knowing the longest past results can help you choose a strong, solid company with a proven track record. In this way, you can get an idea of ​​the future prospects of the company. If the results are good, the share price also rises.

In order to have a good image of your company and buy shares at the right price, you need to know the company’s financial ratio and the estimated price. There are two methods for determining a stock’s benchmark price: relative valuation and implied valuation.

Relative valuation is carried out by comparing the shares of the company with the shares of other similar companies. Internal valuation is a technical valuation that evaluates a business based on its ability to generate future cash flows.

Used indicators:

> PBV (price to book value).

Relationship between price and book value. The book value of the company.

> PER (price/earnings ratio).

It is the ratio of share price to earnings per share. PER is used to determine if a stock is high or low. The P/E ratio is calculated by dividing a stock’s price by its earnings per share.

> Return on equity (ROE) and return on assets (ROA)

This figure represents the utility a company can generate compared to its own or paid-in capital. This ratio also represents the return on investment in the company’s shares. Companies with high ROA and ROE promise high profits.

> EPS (earnings per share).

Earnings per share earned by a company. The higher the better. EPS is an important factor in determining P/E, which determines the valuation of a stock’s price.

> Active and passive.

How many assets the company owns and whether these assets are productive for generating income. Also look at how the company finances the ownership of these assets with debt or equity.

> Debt ratio

DER, or Debt Equity Ratio, is a debt ratio that shows whether a company can pay interest on its debt and not put a strain on the company’s finances. Make sure that the amount of business debt does not exceed the total amount of the principal debt. The DER value is calculated by comparing total debt with total equity. A company with a DER greater than 1 is an indicator of an unhealthy financial situation.

> Analyzing cash flow.

This analysis shows the company’s ability to generate cash, the lifeblood of the business, which should be generated from business operations and profits rather than debt or cash inflows.

> Dividend

A dividend is a distribution of profits paid to shareholders in cash, approved by the General Meeting of Shareholders (GMS). Paying dividends indicates that the company is in good health and has strong cash flow. You can see DPR or Dividend Payout Ratio which is a measure of how big a company’s dividend payout ratio is.
If you want to do fundamental analysis, the quickest way is to check out the various features provided by apps and websites of securities companies such as www.rti.co.id and www.investing.com.

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