It is very important to analyze the market before investing in the market. Therefore, we have prepared a briefing to analyze the market fundamentally which is as follow:
R E A D Y T R A D E R S
1.Intrinsic value:
Intrinsic value is a way of describing the perceived or true value of an asset. This is not always identical to the current market price because assets can be over- or undervalued. Intrinsic value is a common part of fundamental analysis, which investors use to assess stocks, as well being used in options pricing.
The first step is that you first have to see whether the market share is within the intrinsic value or not. If the price is above intrinsic, then this is a red flag for you
2.PE Ratio :
The price-to-earnings (P/E) ratio indicates how much investors are willing to pay for each rupee of a company's earnings. It's a popular valuation metric that helps gauge whether a stock is potentially overvalued or undervalued relative to its earnings. A higher P/E ratio generally suggests investors expect higher future earnings growth, while a lower P/E ratio might indicate undervaluation or slower growth prospects.
The second step is to check if the price is within the intrinsic value and then look at your PE Ratio which should normally be around 17 or 20, the lower the PE the better.
3.PB Ratio :
The price-to-book ratio, or P/B ratio, (also PBR) is a financial ratio used to compare a company's current market value to its book value (where book value is the value of all assets minus liabilities owned by a company). The calculation can be performed in two ways, but the result should be the same. In the first way, the company's market capitalization can be divided by the company's total book value from its balance sheet. The second way, using per-share values, is to divide the company's current share price by the book value per share (i.e. its book value divided by the number of outstanding shares). It is also known as the market-to-book ratio and the price-to-equity ratio (which should not be confused with the price-to-earnings ratio), and its inverse is called the book-to-market ratio
4.Debt to Equity :
This means how much loan the company has taken. Taking a loan is not a wrong thing. You have to see what is the repaying capacity of the company and whether it is able to complete the loan or not.
The smaller the loan amount the better, for example 2 for 4 or 10 for 10
5.Current Ratio :
The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its short-term obligations. It is the ratio of a firm's current assets to its current liabilities, Current Assets Current Liabilities. The current ratio is an indication of a firm's accounting liquidity.
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