2. LAP: QS-042

3. Objectives Describe fundamental analysis. Discuss measures used in fundamental analysis.

4. Describe fundamental analysis. Objective

5. The Benefits of Stock Investing 1.The possibility of high returns 2.Learning about companies and the people and products behind them

6. What is the best way to value a stock? Market valueMarket value $22.57 per share Book valueBook value

7. Looks at all aspects of the company itself Not simply market value Not just book value But intrinsic, or fair, value Many approaches Fundamental Analysis $3 billion 1.79 55¢ 2,87917/24

8. Qualitative factors Fundamental Analysis Qualitative factors 2,87917/24 1.79 55¢ $3 billion Quantitative factors + Quantitative factors Estimate of value

9. Is the company’s stock overvalued or undervalued? $2.55 per share

10. Discuss measures used in fundamental analysis. Objective

11.  No single measure is the only measure to watch.  Put measures in context It’s All Relative As part of the overall pictureAs part of the overall picture To make comparisons to past performanceTo make comparisons to past performance To make comparisons to similar companiesTo make comparisons to similar companies

12. Know the company Qualitative Factors How it makes money (business model)How it makes money (business model) Product or serviceProduct or service ManagementManagement Strength of brandStrength of brand

13. Characteristics of the sector and industryCharacteristics of the sector and industry Level of competitionLevel of competition Barriers to entryBarriers to entry Qualitative Factors (cont’d) Size up the competition

14. Sales Quantitative Factors Sales EPS Earnings per share How many goods/services are being sold?How many goods/services are being sold? Look for growthLook for growth What are profits on a per share basis?What are profits on a per share basis? Net earnings / # of outstanding shares of common stockNet earnings / # of outstanding shares of common stock

15.  Profitability Quantitative Factors  (cont’d)  Return on equity (ROE) How much of a company’s sales is profit?How much of a company’s sales is profit? Profit / salesProfit / sales How well is your investment being used?How well is your investment being used? Net earnings / book valueNet earnings / book value

16.  Price-earnings (PE) Quantitative Factors  (cont’d)  Price-earnings and growth (PEG) How much are investors willing to pay for earnings?How much are investors willing to pay for earnings? Stock price / EPSStock price / EPS How well are investor expectations reflected in growth?How well are investor expectations reflected in growth? PE / annual EPS growthPE / annual EPS growth

17. How have you responded to: Trend Spotting $ Rising fuel costsRising fuel costs What industries are affected by these trends? Changes in entertainment technologyChanges in entertainment technology Internet shoppingInternet shopping Quick Case

18. MarkED Acknowledgments Original Developers Christopher C. Burke and Jane Wright, MarkED Version 1.0 Copyright © 2007 MarkED Resource Center

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