Fundamental analysis is the practice of estimating what a company is actually worth by examining its business: its assets and liabilities, its revenue and profit, its competitive position, and its capacity to keep generating cash in the future. Where technical analysis studies price and volume on a chart, fundamental analysis studies the underlying business the…
The income statement (also called the profit and loss statement, or P&L) answers a single question: over a given period, did the company make or lose money, and from what? It flows top to bottom from the broadest number to the narrowest. The income statement waterfall: from revenue down to net income. Revenue and the…
Where the income statement covers a period of time, the balance sheet is a snapshot at a single moment: everything a company owns, everything it owes, and the difference between the two. It rests on one identity that always has to balance, which is where the name comes from: Assets = Liabilities + Shareholders’ Equity….
Net income, on the income statement, includes non-cash accounting items — depreciation, stock-based compensation (paying employees partly in stock instead of cash), changes in estimated reserves — that don’t correspond to actual cash moving in or out of the business. The cash flow statement strips all of that away and answers a more literal question:…
US-listed companies are required to disclose their financials and material events through filings with the Securities and Exchange Commission, published on the SEC’s EDGAR system and freely accessible to anyone. Knowing what a handful of common filing types contain turns a wall of regulatory paperwork into a genuinely useful research shortcut. Six common SEC filings…
Valuation multiples compress a company’s financials into a single ratio that can be compared against peers and against the company’s own history. No multiple is a complete answer on its own — each one answers a slightly different question, and each one can mislead when used without context. P/E ratio only means something compared against…
An economic moat is a durable competitive advantage that protects a company’s profits from competitors over long stretches of time — a term popularized in value-investing circles as a metaphor for the water-filled trench that protected a medieval castle. Identifying whether a company has one, and how wide it is, is one of the more…
This closing lesson ties the course together around the practical question fundamental analysis is ultimately trying to answer: what might change a company’s trajectory, and what signs suggest that trajectory is already in trouble. Five red flags worth specifically checking for in a company's filings. What Counts as a Fundamental Catalyst A catalyst is a…