Most Used Fundamentals In Stock Market Detailed Explanation

 We All Know That Fundamentals Play a Key Role In Stock Market Many Investors Before Buying a Stock Analyze The Fundamentals of That Company Like ROE,P/E, EPS, Book Value etc.. here in this article i will explain about few key Fundamentals one should look up to before buying a stock.

Market Cap :

Market Cap  means Total Value Of a Companys Outstanding Shares its calculated by multiplying price of a stock by its total number of outstanding shares.

EPS :

Earning Per Share(EPS) means Companys Net Profit divided by its Total Outstanding Shares 

It Indicates how much money a company makes for each Share of its Stock generally every company mentions its EPS whenever its Financial Results are Released

Stock P/E :

Price to Earning Ratio (pe) is widely used by Investors for stock valuation, to get PE value of a company first we need to know its Stock Price & Earning per Share (EPS). 

PE ratio compares a company's share price to its Earning per Share (EPS)                                                                                  P/E ratio = Share Price / Earning per Share 

Price/Earnings to Growth (PEG) Ratio :

PEG ratio is a stocks P/E ratio divided by the growth rate of its earnings for a specified time period. the PEG ratio is used to determine a stock's value while also factoring in the company's expected earnings growth, and it is thought to provide a more complete picture than the more standard P/E ratio.

A lower PEG may indicate that a stock is undervalued, a PEG lower than 1 is best suggesting that a company is relatively undervalued 

Book Value :

Book Value means Difference Between a Companys total Assets and Total Liabilities Book Value of a Stock is the amount of money that would be paid to Shareholders if the Company was Liquidated and Paid off all of its Liabilities. Book Value is Value of the Company according to its Books

Dividend :

A Dividend is a Reward that Companies extend to their Shareholders from Companys Net Profit

Dividend Yield :

Dividend Yield which is seen in Percentage shows how much a Company pays out in Dividends each year relative to its Stock Price (Dividend/Share Price).

EBIT :

Earnings before Interest and Tax (EBIT) it is also known as Operating Income it shows how much a company generates from its operations alone excluding Interest and Taxes. EBIT is determined by deducting revenue from the cost of Goods sold and Operating Expenditures.

ROCE:

Return On Capital Employed (ROCE) this Ratio helps us to Understand how well a company is generating Profits from its Capital as it is put to use. ROCE is calculated using EBIT and Capital Employed.

Capital Employed is calculated by deducting current liabilities from total assets

                      ROCE = EBIT / CAPITAL EMPLOYED

Higher ROCE percentage tend to indicate that companies are Profitable

ROE:

Return On Equity (ROE) this ratio helps us to understand how effectively a company is using investors money.ROE is calculated using Net Income and Shareholders Equity

Net Income means Profitability after deduction of associated costs such as taxes, interests, depreciation

expense and more.

Shareholders Equity means the remaining assets available to shareholders after all the liabilities are paid

            ROE = NET INCOME / SHAREHOLDERS EQUITY

Higher ROE means that a company efficiently uses its Shareholder's equity to generate Income

Promoter Holding :

A Company Ownership structure splits into Promoters & Non-Promoters

Promoters are Owners of the company they are the ones who operate the company inside so promoters having high percentage of holding indicates there trust on the company

Promoter Pledge :

When You are analyzing the Fundamentals of a Company Its Important to looking at the Pledge amount on Promoter shares. Pledging of  Promoter shares means when a company needs funds for regular operations or expansion it approaches a bank for a loan to avail the loan company needs to provide some collateral to the lenders and Banks asks companies to offer Promoters Shares as collateral for the loan. this is Pledging Of  Promoter's  Shares 

Typically Companies opt for this route when all other source of raising funds seems improbable.so higher percentage of  Promoter Pledge might be a sign of possible financial duress in the company. 

Debit to Equity (D/E) :

Debit to Equity ratio depicts how much debt a company has compared to its assets. it is calculated by dividing a company's total debit by total shareholders equity. a high D/E ratio is a sign of high risk it means company using more borrowing to finance its operations 

D/E ratio tells how much debit you have per Rs 1 of equity. a ratio of  0.50 means that you have Rs 0.50 of  Debit for every Rs 1 in Equity. a ratio of above 1 indicates more debit than equity.

Debtor Days :

Every company needs customers to buy their product, some customers will pay upfront and some will pay after some days, if they choose to pay in future they will become the debtors, and this amount will become amount receivable for the company. this ratio measures how quickly cash is collecting from debtors. the longer it takes for a company to collect, the greater the number of debtor days.

Current Assets & Current Liabilities :

Current assets are those that can be converted into cash within one year, while current liabilities are obligations expected to be paid within one year. examples of current assets include cash, inventory, and accounts receivable. examples of current liabilities include accounts payable, wages payable, and the current portion of any scheduled interest or principal payments.

Free Cash Flow (FCF) :

Free Cash Flow represents the amount of cash generated by a business, after accounting for reinvestment in non-current capital assets by the company. FCF is one measure of a company's financial performance. it shows the cash that a company can produce after deducting the purchase of assets such as property, equipment and other major investments from its operating cash flow. in other words FCF measures a company's ability to produce what investors care most about cash thats available to be distributed in a discretionary way

Net Cash Flow :

Net cash flow refers to the net increase or decrease in a company's cash and cash equivalents during an accounting period. it provides insight into how well a company manages its cash position through operating, investing and financing activities. positive cash flow indicates that more cash is coming into the company than flowing out.

Free cash flow focuses on cash from operations minus capital expenditures. it measures how much cash is available for distributions after money invested to maintain or expand the business.

Net cash flow looks at the total change in cash and cash equivalents based on all business activities. it provides a comprehensive view of cash inflows and outflows.

CAPEX :

Capital Expenditure (CAPEX) are funds used by a company to acquire, upgrade and maintain physical assets such as property, plants, buildings, technology, or equipment. 

It is important to keep in mind that CapEx has a significant impact on a firm's long term and short term financial standing. so decisions about CapEx are critical for the financial health and sustainability of a company.