What Is A Share Fundamental? Here's How To Analysis And Indicators

Illustration of stock fundamental analysis (Unsplash/Joshua Mayo)

YOGYAKARTA - Many young people or millennials in Indonesia are starting to attract stock investment. Some have made a profit to become stock investors, but not a few also often suffer losses. There are still many stock investors who do not know the stock analysis in determining the issuer they want to buy.

There are two common-known stock analysis techniques, namely fundamental analysis and technical analysis. For those of you who want to be an investor or a long-term investment, a suitable stock analysis technique is fundamental. What is fundamental stock.

What are Fundamental Shares?

fundamental stocks are factors in the company that affect the health of stocks. These factors include company performance, business competition, industry, macro or microeconomic conditions.

The existing factors from the company are used as material for calculating stock conditions. From this fundamental, investors can see or consider the condition of the company's shares in the future or in the long term.

A fundamental analysis is the study of matters relating to the company's financial condition. The goal of fundamental analysis is to find out the basic properties and operational characteristics of the company.

Approximation in Fundamental Analysis of Shares

Investors can make two approaches in the fundamental analysis of stocks, namely bottom up and top down approaches. Both approaches have different approaches.

Bottom Up Approach

The Bottom Up approach is a method of bottom and top stock analysis. To perform analysis, investors must first choose their target shares. After that, just look at the performance or financial reports.

Investors see the trend of macro and microeconomics to see if stocks are worth choosing for long-term investments. In addition, investors need to compare it to performance in similar industrial sectors. That way investors can find out the price of the outstanding stock whether it describes the entire value of the company's chances and risks.

The top down approach is done from top to bottom, the opposite of the bottom up approach. The way to analyze shares is by looking at macroeconomic conditions first. Next, just look for the leading business sector and see the company's financial performance.

Macroeconomics is considered to play a significant role in the performance of the company's capital market and stock. The macro conditions are analytical material, in the form of fiscal and monetary acquisitions. Factors analyzed, such as inflation, taxation, development of gross domestic product (GDP), unemployment rate, and benchmark interest rate.

Through this approach, investors can see opportunities in an industrial sector. For example, when the government increases the oil and gas budget, the shares of mining companies will increase.

After knowing which industrial sector has the opportunity for profit, investors then carry out micro-analysis to find out the condition of the company. Investors need to look at the company's financial statements.

Indicator of Reference for Functional Analysis of Shares

Investors need to know the indicators that are the reference in the fundamental analysis of stocks. These references or ratios can describe the company's performance, financial health, company prospects in the future, reference stock prices, and so on.

Price to Book Value (PBV) is the ratio to assess the share price of a company. Through this ratio, investors can see whether the share price is cheap or expensive. Comparison ratio is obtained from the book value or capital controlled by the company.

The price to Earning Ratio (PER) is the ratio of the share price to net profit per share. The ratio is also used to see if the price is expensive or the price is low.

Return on equity (ROE) and return on assets (ROA) are ratios to see the level of return on a company's share investment. ROE and ROA show the amount of the company's profit, the result of equity comparisons or paid-up capital.

Earning per share (EPS) is the ratio used to measure the entire company's net profit. Measurements are made of the amount of each company's shares in circulation. If high EPS is usually the company's income is also high.

Assets are everything that the company has. Whileliability is the company's forest responsibility from past events. Through these two elements, investors can see whether the company's assets come from their own capital or debt.

The Debt equity ratio (DER) is the debt ratio used to see the company's ability to pay debt interest and not burden the company's finances. Investors need to ensure the company's forest count is no greater than its capital.

The cash flow analysis is used to see the company's ability to generate cash. Cash is one of the important factors in the business. The company's cash is better generated not from debt or capital injections.

Dividend is the distribution of profits paid in cash to investors holding shares. Give this advantage which was approved by the General Meeting of Shareholders (GMS). Health and cash flow companies can be seen through dividend distribution indicators.

That's the fundamental explanation of stocks. Investors must know how to analyze fundamental stocks in order to choose the right shares. There are two approaches that can be used and several indicators that need to be understood.