Stock Market Investing... One of the primary tools people use to understand when they should or should not be investing is fundamental analysis. This way of looking at potential investments involves looking closely at a company's financial health and performance to understand if it's a good investment.

By examining key financial data from companies' quarterly reports such as revenue, earnings, assets, and liabilities, investors can make informed decisions based on the value they see in companies. Understanding the basics of fundamental analysis is crucial for making intelligent investment decisions and understanding the investments you make. 
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​Instead of looking at the details of the income statement, balance sheet, and statements of cash flows that companies issue, many investors look at key financial ratios based on the most important information in those documents. By looking at the most important numbers and some financial ratios, investors can gain a good understanding of the companies they are looking to invest in. 
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​Let's take a look at some of the primary metrics and ratios that investors look at to determine how good their potential investments might be. 

Market Cap (Market Capitalization): Market cap represents the total value of a company's outstanding shares of stock, and is calculated by multiplying the current market share price by the total number of outstanding shares.

EV (Enterprise Value): Enterprise value is another way to measure a company's value, taking into account its market cap as well as the company's debts and cash holdings. 

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): EBITDA is a financial metric used to evaluate a company's operating performance prior to some of their key expenses. It can show the company's profitability, particularly in the short-term.

PE Ratio (Price-to-Earnings Ratio): The PE ratio is calculated by dividing the current stock price by the company's earnings per share. It shows how much investors will pay for each dollar the company earns.

PEG Ratio (Price/Earnings to Growth Ratio): The PEG ratio is a valuation metric that takes into account the expected rate a company's earnings are expected to grow, adding a good look for future valuation compared with the PE ratio.

Beta: Beta is essentially a measure of how much a change in the market will cause a change in the particular stock. In other words, it measures the volatility of the stock in relation to the volatility of the market as a whole. 

EPS (Earnings Per Share): EPS is a measured by taking a company's net income minus preferred dividends divided by the number of outstanding shares. This essentially shows how much money the company makes per share of stock outstanding. 

Dividend Yield: Dividend yield is a financial ratio calculated by dividing the annual dividend per share by the stock price. The dividend yield shows the percentage return investors receive from dividends based on the current market price.

​Revenue: Revenue is the total income generated by a company from its core operations, providing insight into its sales performance and overall financial health. Revenues are often measured year over year or quarter over quarter to help investors find trends that may continue into the future. 
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​By beginning to understand basic fundamental analysis and key metrics such as these, investors are able to gain a better idea of what they are investing in. They can try to find better investments and pick up stocks that are undervalued. 
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Investing for the long term is about trying to find companies that are going to increase in value over time. These companies provide good opportunities for investors to make money over time. ​
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​Until next time, 
​Happy Trading... 
​and Happy Investing!