What are the components of fundamental analysis ?
A few elements of quantitative fundamental analysis are EPS, P/E ratio, P/B ratio, Debt/Equity ratio and RoE ratio. These are among the few fundamental indicators that help you understand deeper about the company/stock.
· Earning Per Share is called EPS. This is a measure of profitability.
· EPS = Net Profit of The Company divided Number of Outstanding Shares
· Price to Earnings Ratio is called P/E ratio. This is a measure of valuation.
· P/E = Price of Stock divided Earnings Per Share
· Price to Book ratio is called P/B ratio. This is a measure of valuation for banking and financial companies.
· P/B = Price of Stock divided Book Value of Stock/Company
· Debt to Equity ratio is called D/E. This is a measure of indebtedness.
· Debt to Equity Ratio = Total Liabilities of the company divided Total shareholder’s equity
· Return on Equity Ratio is called RoE. It is a profit measure that can be generated with the money that has been invested by its shareholders.
· Return on equity = Net Income of company divided by Shareholder’s equity
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