Fundamental Analysis

What this video covers

• The critical distinction between fundamental analysis (financial statements and intrinsic value) and technical analysis (price and volume data only), and which tools belong to each camp
• How earnings per share (EPS) is calculated as net income divided by shares outstanding, and why it matters on a per-share basis
• What the price-to-earnings (P/E) ratio measures, why a P/E of 20 means investors pay $20 for every $1 of earnings, and how to interpret higher vs. lower P/E relative to growth and value stocks
• Why P/E is relative and must be compared within the same industry or sector, not across unrelated companies
• How book value per common share is calculated, and the exam trap of subtracting preferred stock (at par or liquidation value) before dividing by common shares outstanding
• Why the price-to-book (P/B) ratio uses one as its magic number, what P/B less than 1 signals about potential undervaluation, and why P/B is most useful for asset-heavy industries
• What the dividend payout ratio measures as dividends per share divided by EPS, and how high vs. low payout ratios differ between value stocks and growth stocks