Fundamental analysis of US stocks: key aspects and indicators

Fundamental analysis of US stocks is the process of evaluating and analyzing the financial and business indicators of companies with the aim of determining their true value and potential for investment. This method is fundamental to many investors as it allows them to make informed decisions based on fundamental data rather than just market price changes. In this article, we will explore key aspects of fundamental analysis of US stocks using investment and economic analytics.

In fundamental analysis of US stocks, it is important to pay special attention to the following aspects:

1. Financial statements: Analyzing the financial statements, including income statements, balance sheets, and cash flow statements, will help understand the company's financial position.

2. Company's profitability: Examining the company's profitability and its ability to generate profits for shareholders.

3. Debt and liquidity: Evaluating the company's level of debt and liquidity will help determine its financial stability.

4. Macroeconomic context: Consider the overall macroeconomic context and its impact on the company's operations.

When analyzing the fundamental performance indicators of companies, it is essential to focus on key factors such as:

1. Revenue and sales growth: Studying the total sales volume and its dynamics will help determine whether the company is growing and how successful its operations are.

2. Net profit and profitability: Assessing the level of profit and profitability of the company will enable the determination of its efficiency.

3. Market share: Investigating the company's market share allows evaluating its competitiveness.

4. Solvency: Examining the solvency of the company will help determine its ability to meet financial obligations.

In fundamental analysis of stocks, it is essential to compare a company's metrics with similar indicators in its sector. This allows understanding how well the company is performing compared to its competitors.

Comparing a company's efficiency metrics with sector benchmarks is a crucial step in fundamental analysis of stocks. These metrics provide investors with information about how effectively the company manages its resources and generates revenues compared to its peers in the sector. Various efficiency indicators, such as profitability, asset turnover, margins, and others, are used in comparative analysis.

An important indicator is the company's profitability, expressed, for example, through the Return on Equity (ROE) ratio - the ratio of net income to equity. Comparing a company's ROE with sector median values allows assessing how successfully the company utilizes its capital to generate profits compared to other players in the market. A high ROE may indicate effective asset management and attractiveness to investors.

Another important indicator is the total asset turnover, expressed, for example, through the Total Asset Turnover ratio - the ratio of a company's revenue to its total assets. Comparing this metric with sector average values allows evaluating how efficiently the company uses its assets to generate revenue. High asset turnover can indicate an efficient business model and operational advantages for the company.

It is also worth paying attention to the company's margins - the ratio of profit to revenue. Comparing margins with sector median values allows determining how well the company manages its operating expenses and its ability to generate profits at each level of sales.

When comparing a company's efficiency metrics with sector benchmarks, it is important to consider the business's specifics and market conditions. Some sectors may be more capital-intensive or operationally intensive, which can affect the values of the mentioned metrics. It is also necessary to consider the cyclical nature of industries and specific factors influencing the results of companies in different sectors. Additionally, investors should analyze the dynamics of metrics over time and compare them with previous periods to assess trends and the company's efficiency stability over the long term. All of this will help investors make informed decisions based on fundamental analysis and determine the attractiveness of the company's stocks in the context of its sector.

Multiples, such as Price/Earnings (P/E), Price/Book (P/B), and others, help determine a company's stock value relative to its earnings and assets. It is essential to compare a company's multiples with the median values of the S&P 500 market to assess whether the stocks are overvalued or undervalued.

Comparing a company's multiples with S&P 500 market values is a crucial aspect of fundamental analysis of stocks. Multiples represent the ratio of a company's market value (usually its market capitalization) to specific financial metrics, such as earnings, revenue, assets, or dividends. They assist investors in evaluating whether a company's stock is overvalued relative to its fundamental value and the market average.

During the analysis of a company's multiples, they are compared to the multiples typical for the S&P 500 market's average values. When a company's multiples significantly exceed the market's average values, it may indicate that investors are willing to pay a premium for the stock due to high growth expectations or other factors. In such cases, the stock may be considered overvalued, and investors should exercise caution when deciding to purchase it.

Conversely, when a company's multiples are lower than the market's average values, it may indicate that the stock is undervalued and has potential for future growth. In such situations, investors may view the company as an attractive investment opportunity, as it offers the possibility to acquire the stock at a lower price than its fundamental value implies.

However, it is essential to understand that multiples are not the sole criterion for stock analysis. They should be considered in the context of other fundamental indicators and the company's specific characteristics and industry. It is also important to consider that multiples can change over time and are influenced by market conditions. Therefore, when making investment decisions, investors should take into account a wide range of factors and conduct comprehensive analysis to make an informed choice according to their investment goals and risks.

Value Stocks are companies whose multiples are below the market average, indicating that they may be undervalued. The selection of Value Stocks involves identifying companies with strong financial indicators but relatively low market capitalization.

Selecting Value Stocks is one of the key investment strategies in financial markets. This strategy is based on the principle of seeking undervalued stocks, whose market value is lower than their intrinsic value. Investors applying the Value Investing approach look for companies with a low price-to-intrinsic value ratio.

To select Value Stocks, investors pay attention to several key factors. Firstly, they consider the company's financial indicators, such as profitability, asset profitability, debt burden, and dividends. Investors seek companies with a solid financial foundation and a stable income stream. Secondly, they analyze the company's growth prospects, its relation to market trends, and competitive environment. Investors aim to find companies with promising growth prospects that have temporarily experienced a decrease in value due to external factors.

Another crucial part of the Value Investing strategy is assessing the company's value using fundamental analysis. This includes calculating the stock's intrinsic value based on future cash flows, discounted with consideration of risks and the cost of capital. If the current market price of the stock is below its intrinsic value, investors consider it potentially undervalued and may view it as a suitable investment opportunity.

However, it is worth noting that investments in Value Stocks come with their risks. Companies may be undervalued for certain reasons, such as management issues, inefficient business models, or structural changes in the market. Therefore, when applying the Value Investing strategy, investors should be prepared for possible fluctuations in the market value of stocks and make informed decisions based on fundamental analysis and long-term perspectives of the companies.

Growth Stocks are companies with high earnings growth rates and high market expectations. The selection of Growth Stocks involves finding companies with high profitability and potential for further growth.

Fundamental analysis of US company stocks plays a crucial role in the investment process, allowing the assessment of their real value and growth potential. During the analysis, attention should be given to financial indicators, the macroeconomic context, and comparisons with competitors and the overall market. The choice between Value Stocks and Growth Stocks depends on investor objectives and risk tolerance.

Selecting Growth Stocks is an investment strategy that focuses on identifying companies with high growth potential and profitability in the future. Investors using the Growth Investing approach seek companies capable of increasing their earnings and revenue over an extended period. The selection of such companies involves analyzing a range of key factors based on economic environment and investment targets.

The first important factor in selecting Growth Stocks is the dynamics of the company's historical financial indicators, such as revenue, profits, and asset growth. Investors pay attention to stable and rapid growth indicators, indicating a healthy and successful company. Additionally, the growth dynamics of the industry in which the company operates are analyzed to determine its competitiveness and potential for further growth.

The second key aspect is investigating the innovation and prospects of the company's products or services. Investors look for companies offering unique and market-demanded products capable of taking leading positions and ensuring stable sales growth in the future. This may involve developing new technologies, implementing new business models, or resourceful solutions that allow the company to differentiate itself in the market.

The third aspect is evaluating the company's financial indicators and management policy. Investors are interested in management efficiency, debt levels, stability of dividend payments, and other factors that may influence the company's long-term growth sustainability. Companies that effectively utilize their capital and strive for long-term growth are considered attractive to investors following the Growth Investing strategy.

It is essential to note that investments in Growth Stocks also carry risks associated with high market expectations for such companies. Price volatility of the stocks may be higher, and the growth of companies may be less stable. Therefore, investors pursuing the Growth Investing strategy should have an appropriate investment horizon and be prepared for possible market fluctuations in the pursuit of long-term growth prospects.

In the context of fundamental analysis of US company stocks, investors consider various companies from different sectors of the economy. Below are several examples of stock tickers of companies that can be used to illustrate the process of fundamental analysis:

1. Apple Inc. (AAPL): Apple Inc. is one of the leading technology companies, producing a wide range of products such as iPhone, iPad, Mac, and more. When conducting fundamental analysis for AAPL, investors pay attention to financial indicators such as earnings over the past year, profitability, and sales volume. It is also essential to compare multiples such as Price/Earnings (P/E) and Price/Book (P/B) with median values in the technology sector and the S&P 500 market. This will help assess whether the company's stock is overvalued or undervalued at the current price level.

2. Johnson & Johnson (JNJ): Johnson & Johnson is the largest company in the healthcare sector, specializing in the production of medical products, personal hygiene goods, and pharmaceuticals. In the fundamental analysis for JNJ, it is crucial to examine financial indicators such as net income, dividend yield, and total sales volume. Comparing JNJ's multiples and dividend yield with other companies in the healthcare sector and the overall market will help determine whether the company is overvalued or undervalued relative to its competitors.

3. Coca-Cola Company (KO): The Coca-Cola Company is a global leader in the production of beverages and consumer goods. In the fundamental analysis for KO, attention should be given to financial indicators such as sales growth, profitability, and debt burden. Comparing key financial indicators of KO with other companies in the consumer goods sector will help understand how Coca-Cola stands against its competitors and whether its current stock price corresponds to its fundamental value.

4. Amazon.com Inc. (AMZN): Amazon.com is a global leader in retail and technological solutions. In the fundamental analysis for AMZN, financial indicators such as profit growth, sales volume, and investments in innovation should be analyzed. Comparing AMZN's multiples and growth with other companies in the retail industry and the S&P 500 market will help determine how Amazon.com compares to other players in the market and whether its stock has potential for further growth.

5. Alphabet Inc. (GOOGL, GOOG): Alphabet Inc. is a diversified technology company that includes Google, the largest search engine in the world. In the fundamental analysis for GOOGL, financial indicators such as net income, profitability, and research and development investments should be studied. Comparing key financial metrics of GOOGL with other technology companies will help understand how competitive Google is and whether it has potential for further growth in its sector.

Please note that the choice of companies for fundamental analysis depends on your investment objectives and the sectors of the economy that interest you. When conducting the analysis, it is essential to use up-to-date data and rely on reliable sources of information, such as companies' financial reports and analytical platforms. Fundamental analysis will help you make informed decisions and build a sustainable investment portfolio based on the financial stability and prospects of companies.