Fundamental Analysis One of the most popular ways of studying stocks is called fundamental analysis. Investors who use this approach like to look at basic information about a company, such as the growth of its sales and profits, in an effort to figure out what they think is the true, or "fair," value of that company's stock. By comparing the current stock price to that fair value, you can determine if it might be a good time to buy that stock -- or if it's a stock to avoid Most individual investors use fundamental analysis in some way to pick stocks for their portfolios. If you're looking for a way to build a "buy-and-hold" portfolio of stocks, made up of companies that you can purchase and then own for years without losing too much sleep at night, you'll probably use the methods of fundamental analysis. Investors who use fundamental analysis usually focus on two separate approaches to picking stocks: growth or value (or sometimes a combination of both).

Fundamental Analysis- Growth Investors who focus on growth try to predict which companies will grow faster in the future -- faster than the rest of the stocks in the market, or faster than other stocks in the same industry. If you're successful in buying a company that does grow faster than other companies, then it's likely that the price of that company's stock will increase as well, and you can make a profit. The stock of a company that grows its earnings and revenues faster than average is known as a growth stock. These companies usually pay few or no dividends, since they prefer to reinvest their profits in their business. PAYX, KO, MSFT

Fundamental Analysis- Growth Growth Investing Guidelines 1.Strong Historical Earnings Growth 2.Strong Forward Earnings Growth a projected five-year growth rate of at least 10-12%, although 15% or more is ideal.growth rate these projections are made by analysts, the company or other credible sources.analysts 3. Is Management Controlling Costs and Revenues? Is the EPS growing?

Fundamental Analysis- Value Value investors look for stocks that have been overlooked by other investors and that may have a "hidden value." These companies may have been beaten down in price because of some bad event, or may be in an industry that's looked down upon by most investors. However, even a company that has seen its stock price decline still has assets to its name – buildings, real estate, inventories, subsidiaries, and so forth. Many of these assets still have value, yet that value may not be reflected in the stock's price. Value investors look to buy stocks that are undervalued, and then hold those stocks until the rest of the market -- hopefully -- realizes the real value of the company's assets.

Fundamental Analysis- Value Value Investing Guidlines What do value investors look for in a potential investment? Here are some guidelines gathered from a variety of value investors. Investors should settle on a formula that works for them, but it will probably include as a minimum these elements: A Price Earnings Ratio (P/E) in the bottom 10 percent of its sector.Price Earnings Ratio (P/E) A PEG of less than one.PEG A PEG of less than one may indicate the stock is undervalued. A Debt to Equity Ratio of less than one. Strong earnings growth over an extended period. A realistic number might be in the 6% - 8% range over 7 to 10 years. A Price to Book ratio of one or less.Price to Book ratio