Fundamental basis

One of the approaches of deciding whether to buy or not to buy a stock could be using fundamental analysis.

This means you evaluate the fundamentals, think about how much profit is the company making, how much debt does the company have but also as an investor how many times you pay the profit also known as the price/earnings or P/E ratio which we will explain in the next chapter.

An important indicator also is to look at how much money the company needs to reach a certain profit, this is also known as the cost ratio.

So if a company earn EUR 100 but needs EUR 70 to reach that profit then obviously the company is less efficient or more capital requiring than a company that needs EUR 40 to reach the same EUR 100.

Click on the video below to learn about the Fundamental Basis