Fundamental

The Importance of the Company Balance Sheet
to Investors

The company Balance Sheet is a financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. The balance sheet is one of the three important financial statements for a company (the Income Statement and the Cash Flow Statement being the other two). In analyzing the balance sheet, investors [...]

Understand and Calculate the Price-to-Cash-Flow Ratio

The Price-to-Cash-Flow Ratio (P/CF) compares a company’s market value to its cash flow. In general, the lower a company’s P/CF, particularly with regard to the company’s industry average, the more likely that the stock may be undervalued. Like the Price-to-Earnings Ratio (P/E), the P/CF measure provides an indication of relative value. Unlike earnings, [...]

What Insider Buying and Selling
Can Tell Investors

Insider buying or selling refers to the purchase or sale of company stock by a corporate insider. Numerous studies have shown that when insiders buy and sell shares of their own companies, they typically fare better than most stock market investors. SEC rule dictates the parameters in which insiders may engage in company stock [...]

The Income Statement and Fundamental Analysis

A company’s income statement is a record of its earnings or losses for a given time period. It shows the revenues and expenses for the company for this time period. The income statement is the one of the three primary financial statements, the others being the balance sheet and the statement of cash flows. [...]

“Market Cap” and Stock Investing

A company’s market capitalization or “market cap” is its total dollar market value of all of its outstanding shares. The market cap is determined by multiplying the stock price by the total number of outstanding shares. This gives you the total value of the company on the open market. For example, if a company [...]

The Price/Earnings (P/E) Ratio: Definition and Use

The P/E ratio (price-to-earnings ratio) measures the price of a share relative to company earnings company earnings on a per share basis. A higher P/E ratio indicates a willingness by investors to pay more for a unit of income. The measure is most valuable when viewed over time for the emergence of a trend. [...]

Analyzing Free Cash Flow for Stock Valuation

Free Cash Flow (FCF) represents the cash that a company has generated after paying out expenses (salaries, bills, interest on debt, taxes, etc.). As such, it is a measure of the profitability of a company’s operations. FCF is calculated by subtracting capital expenditures from cash flow from operations.

Free cash flow is important to [...]

The PEG Ratio in Stock Valuation

The PEG Ratio (Price/Earnings to Growth), popularized by Peter Lynch in his book, “One Up on Wall Street”, is a measure of valuation that analyzes the relationship between stock price, earnings per share, and the expected growth of the company. The theory is that a fairly-priced stock will have a PEG of 1, while [...]

Determining Stock Intrinsic Value

A stock’s intrinsic value is the perceived “real value” of a stock as calculated through the value of a company’s expected future cash flows and other factors. If the value is determined to be higher than what the stock is currently priced at, the stock is considered to be undervalued. There is no [...]

The Importance of Company Earnings in Stock Valuation

Company earnings are the profits it generates. If you subtract the company’s costs from the revenue it generated over a specified period of time, you have its earnings. Stock evaluation should always include the examination of company earnings. Earnings are viewed as a significant component in analyzing the health of a given company and [...]