Stock Analysis-Market Cap, EPS and Economic Ratios Driven by Fintech Research

Tapasvi Vibhute
·4-min read

The British, French and Dutch governments issued charters to various businesses in the 1600s inclusive of East India. They brought all products back from the East via sea, frequently threatened by extreme storms and pirates, including dangerous journeys.

In order to minimize the chances for sea dangers, shipowners routinely sought out investors to provide collateral funding for a voyage. In return, investors earned a share of the monetary gains realized, filled with goods for sale, if the ship made it back successfully.

This is how the idea of stocks came into reality. Owing to Fintech research, the concept has been refined. Now the market is simpler and accessible to everyone.

Stock Analysis

Analysts in the stock market can look at several variables to indicate the possible future stock trajectory up or down in price. Here’s a list of some of the stock analysis variables most often discussed.

The market capitalization, or market cap, is the cumulative value of all the stock’s outstanding securities. Typically, a higher market capitalization implies a more well-established and economically secure business.

The state expects publicly listed companies to provide earnings reports regularly through exchange regulatory bodies.

Fintech research has enabled market observers to closely watch these reports, published periodically and annually, as a clear indication of how well a business or a company can do.’

Among the significant elements analyzed from earning reports are the company’s earnings per share (EPS), representing the company’s income as shared between all of its existing stock holdings.

Analysts and investors most often analyze a number of financial ratios that reflect a publicly-traded business’s financial stability, profitability, and growth potential. Below are a few of the leading financial ratios that investors and analysts consider:

P/E (Price to earnings) Ratio: The PE is a ratio between a company’s stock price and its EPS. A higher P/E percentage means that investors are prepared for the specific shares to pay higher costs per share because they foresee the company to expand, and the stock price increases.

Debt to Equity Ratio: This is an essential indicator of the financial health of a company since it shows what percentage of the debt is financed by a company’s operations relative to what percentage is funded by equity investors. It is preferable to have a lower debt-to-equity ratio, suggesting direct investor support.

Return on Equity (ROE) Ratio: The returns on equity (ROE) ratio is a good measure of its growth potential since it indicates the company’s net profits compared to the company’s total equity investment.

Profit Margin: There are many profit margin ratios, including operating profit margin and net profit margin, that investors should recognize. So instead of an actual dollar profit figure, the value of looking at profit margin is that it illustrates what the percentage profitability of a business is.

A business, for example, might report a profit of $2 million. Still, if it only results in a profit margin of 3 percent, any substantial drop in sales may endanger its profitability.

Return on assets (ROA), dividend yield, price to book (P/B) ratio, current ratio, and the inventory turnover ratio are other widely used financial ratios.

Investing in Valuation and Investing in Growth

There are two fundamental approaches to investing in capital markets due to analysts’ and investors’ endless stock-picking methods. Still, practically all of them are one type or another of the two basic stock buying tactics for investing in value or investing in growth.

Usually, value investors take part in well-established businesses that have shown stable profitability for an extended period and can deliver steady dividend revenue.

Value investment is more oriented to risk management than growth investment, but value investors try to purchase stocks when they perceive the stock price as an undervalued bargain.

Growth investors search out businesses with extraordinarily high growth prospects, expecting to gain full share price appreciation.

Generally, they are less associated with dividend revenue and are more likely to risk investing in relatively new businesses. Because of their high growth potential, technology inventories are often supported by innovation.

Stock Indexes

Usually, the stock exchange’s financial value is measured and expressed in the ranking of different stock market indices.

Some of the stock market indexes in the form of options and futures contract terms, which are also exchanged on regulated platforms are:

  1. Dow Jones Industrial Average (DJIA),

  2. Standard & Poor’s 500 Index (S&P 500),

  3. Financial Times Stock Exchange 100 Index (FTSE 100),

  4. Nikkei 225 Index,

  5. NASDAQ Composite Index, and the Hang Seng Index.

Stock indexes comprise a stock selection that reflects the overall performance of stocks that investors’ trade. With each passing day, the lists are modified by emerging options. Now investors are more aware and empowered to analyze the stocks and make wiser choices.