Stock Valuation

How to Analyse Stocks.

There are two schools of thought in stock market analysis. Some investors believe the best way to analyze markets is through fundamental analysis, while others believe technical analysis is the way to go. It's probably a good idea to understand both and use a little of each.

Fundamental analysis is where you investigate the underlying value of the company. Using this method, analysts try and predict how the share prices will change. You will ask yourself if the current stock value of a company is over or under-valued. You will use many tools to determine this. First, you will want to find out which stocks fall in to each of the following categories:

1. Value stocks are undervalued and are seen as purchase bargains.

2. Growth stocks

3. Income stocks

4. Momentum stocks are those with prices on a rapid rise, usually seen in emerging growth companies.

Once you have determined what type of stocks the company has, you then need to look at the fundamental volume and value of the company. This can be done with a number of tools including:

Investigating company earnings. These determine the value of a company. Earnings per share (EPS) is the amount of money as a stockholder you get per stock you hold. This is your dividend.

Price/earnings (P/E) ratio will tell you if the stock price is reasonable. Aim for a company with a P/E ratio between 5 and 20. Above or below this could spell trouble.

The market cap of the company will indicate how solid the company is and tell you its liquidation value. There are many other indicators for fundamental analysis but these are the most widely used.

o Greater understanding of relationships among mission and business objectives and environmental/social equity issues

o An improved basis for organizational, investment, and staffing decisions

o Enhanced agility and competitive strength

o Greater employee ownership of environmental/sustainability issues and programs

o Shared vision of the future and the organization's place within it

Conduct a Market Analysis

Overview

Whether you are starting a new business or launching a new product, conducting a marketing analysis is the first step in determining if there is a need or audience for your idea. Knowing the market's needs and how it is currently serviced provides you with key information that is essential in developing your product/service and marketing plan. Too often, businesses spend thousands of dollars launching a "new" idea with a limited market because of competition. The owner is forced to reevaluate his strategy and determine if there is room for another player.

Although the quality of the product is critical, your development of the best product on the market will not necessarily correlate with the most sales. Up to 50 percent of a product's price can be for marketing. The company who wins the marketing game generally will capture the larger share of the market. For related information, see Identify Your Target Market.

Conducting a market analysis will help you:

1. Prepare to enter a new market

2. Launch a new product/service

3. Start a new business

At the completion of this exercise, you should be able to:

* Explain the concepts of a marketing analysis

* Determine if there is a need for your idea or product/service

* Identify a new market

* Analyze your current market

* Gain a competitive advantage

* Begin to establish a marketing plan

Outline:

I. Marketing Analysis - What Is It? Why Should You Do It?

II. The Complete Process:

A. Defining the Problem

B. Analysis of the Situation

C. Obtaining Data That Is Specific to the Problem

D. Data Analysis and Interpretation

E. Fostering Ideas and Problem Solving

F. Marketing Plan

III. Resources

I. Marketing Analysis - What Is It? Why Should You Do It?

Although the terms "marketing" and "marketing analysis" can both be described as games of information, they are not to be confused. Marketing encompasses all of the activities that go into promoting a product or service. A marketing analysis is the actual assessment of the target population, competition and needs for marketing that product or service.

The marketing analysis process can be broken down into six steps:

1. Defining the problem

2. Analysis of the situation

3. Obtaining data that is specific to the problem

4. Analysis and interpreting the data

5. Fostering ideas and problem solving

6. Designing a plan

So, why should you embark on the market analysis process? The primary reasons are:

* To determine if there is a market for your products or services

* To establish the need for developing a marketing plan

* To ascertain market information that will assist in the sale of your product or service

Before embarking on the complete process, complete the following Market Analysis Questionnaire.

Market Analysis Questionnaire

To begin the market analysis process, answer the following questions. If you cannot answer every question, focus on finding the answers even if it means consulting others. This article can be downloaded or printed to enable you to complete the questionnaire.

These questions will