Debt Settlement Scams

Read this 49 page Quantum Swing Trading FREE Report. Turn $200 into $100K in just 3 months with this Penny Stock Trading FREE Report. Meet the High Velocity Market Master and get your FREE COPIES of the Ulimate Day Trading System and the Universal Risk & Money Management Tool just now! Many investors and traders when they hear the word fundamental analysis start sweating and get anxious, fundamental analysis need not worry you, if you know how to keep it simple. Follow the K.I.S.S principle when doing fundamental analysis. You don’t need to do an MBA from Harvard or Stanford to master fundamental analysis.

When you do fundamental analysis of a company and its stock, you should always start with these four basic questions! 1) What is this company’s value relative to its peer companies? 2) What is this company’s growth rate? 3) What is this company’s return on capital? And 4) What is this company’s debt level?

When you have answered these four basic questions, you will get an idea what should be the true value of this stock. You don’t need to fret over calculating the exact intrinsic value of a stock like a Wall Street Expert. You just need to figure out that this stock is worth between $20-30 while it is trading for just $15 per share at the moment.

If you don’t know intrinsic value, it is the supposed true value of the stock. It may not be what the market value at that time is. But over time, the stock will surely attain what it’s intrinsic value is. Now why fundamental analysis works?

Suppose, you have a apartment that you rented for $1500 per month. Compare this with your friend’s apartment who pays $2500 per month. You can easy figure out that the value of your friend’s apartment is double your apartment. In the same way, companies are value by their earnings. Each company reports its quarterly earnings statement. By looking at the quarterly earnings report of different companies, market figures out which stock has more value. So a company’s value is based on its future expected earning potential.

Another reason why fundamental analysis works is that arbitrageurs keep the prices in check as they are always looking for mispricing in the market. This mispricing in the market gives them an opportunity to make riskless profit. So, they immediately pounce on the arbitrage opportunity. When many try to take advantage of that arbitrage opportunity, the mispricing is leveled out and the market prices equal out.

Suppose a company ABC stock is selling for $10 and its’ market value is $100 million with $150 million in cash and no debt. An arbitrageur will immediately detect this arbitrage opportunity and buy the company for $100 million. Use the cash to pay for its purchase. So, fundamental analysis works because firms, individuals and governments are always looking for making riskless profits in the market.

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