Many Fundamental Indicators in the share market can be used to analyze and evaluate the company to invest in, indicating its potential future growth in the share market. The top 7 fundamental indicators are discussed below:

Fundamental Indicators

1. Earning Per Share (EPS)

It is a Fundamental Indicator used to measure a company’s profitability. It is calculated by dividing companies’ net income by the number of company stocks. it provides the company’s profit on a per-share basis. It can vary with company expenses, revenue and taxes. but it is very important to consider EPS in conjunction with another parameter for the best evaluation of the company’s potential growth in the market.

2. Price-to-earning ratio (P/E ratio)

It is a common fundamental indicator in the share market to analyze and evaluate the stock price. It is an important indicator because it gives the numbers on how much investors are ready to spend for each dollar of a company’s earnings. A higher p/e ratio suggests that investors are full of confidence in the company’s future growth.

A lower p/e ratio suggests investors have low confidence in the company’s future growth. It is affected by Eps, changes in stock price and changes in the number of shares. we need to carefully observe these factors to gain more profit from the market. This Fundamental Indicator is one of the most important indicators among others.

3. Price-to-book ratio (P/B ratio):

It is a ratio of the price of stocks to the book value of the stocks. It is a very important and dangerous fundamental indicator in the share market. The price of stocks is the current price of stocks in the market and the book value of the company is all assets of the company – liabilities. The assets of the company are property, machinery, cash, gold etc and the liabilities of the company are the things the company has to pay for example loans. It is one of the parameters of fundamental indicators but it is not recommended to buy seeing only this indicator.

4. Dividend yield:

The dividend yield is also one of the Fundamental Indicators which are used in the analysis of the stocks. It is the amount of dividend distributed to the shareholder according to the market value of the company of shares. For example, if a company pays an annual dividend of $2 per share and its stock price is $50, the dividend yield would be 4% (i.e., $2 / $50 = 0.04 or 4%).

The dividend yield is often used to indicate the income generated by an investment in a particular stock. A high dividend yield can be attractive to investors seeking income, while a low dividend yield may signal that the company is not performing well or that its stock is overpriced.

5.Debt-to-equity ratio:

It is the ratio of the debt of the company to the equity of the shareholders. A high debt-to-equity ratio means the company is highly reliant on company loans and a low ratio means the company is in profit. It is one of the Fundamental Indicators for the analysis of the stocks.

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6. Return on equity (ROE):

Return on equity (ROE) is a financial ratio that measures a company’s profitability by calculating the net income earned as a percentage of shareholder equity. It is an important measure of a company’s financial performance, as it shows how efficiently it uses its equity to generate profits. The formula for calculating ROE is:
ROE = Net Income / Shareholder Equity.

This is also one of the Fundamental Indicators the investor uses to analyse the stocks to buy, sell or hold in the market.

7. Free cash flow (FCF):

The free cash flow is defined as the amount of cash present in the company after all the expenditures are excluded. Having free cash flow makes the company more strong and its price can be higher.

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