If you know how to carry out fundamental analysis then you must definitely ensure that you set following goals. If you achieve these goals then you will definitely get the accurate tips and make a good profit. Whether you are an experienced analyst or a newbie investor, you must have following significant goal, while carrying out fundamental analysis.
- Predicting future price movement
It scans the industry and the economy, thus forecasting the future price movements of the securities. Based on certain parameters, all the fundamental analysts predict the future stock price.
- Determining fair value
It helps in determining the fair value of the company and also helps to decide whether it is undervalued or overvalued. When the current market price is below its intrinsic value then a fundamental analyst prefer to purchase the stock and when the market price goes far above the intrinsic value then he sells the stock. Therefore, fundamental analysis is important in stock picking.
- Management evaluation
Management plays a very important role in making company a successful one. For this reason, fundamental analysis helps in evaluating management and also to make internal business decisions.
- Determining company’s ability to beat its competitor
The goal is not fulfilled if you simply analyze the company’s overall performance but you must rather conduct peer comparison analysis, which is very important. You should always question yourself before investing in a company that whether the company is in a strong position to beat its competitor in the future?
- Analysing company’s financial strength
The real test will be to determine the financial strength of the company and its ability to repay debts. No matter how good or bad the management or other factors are, but at the end of the financial performance matters.