Home stock market What Is Stock Analysis: Overview, Types, Uses & More

What Is Stock Analysis: Overview, Types, Uses & More

Stock Analysis

Investment is a prominent way to channelize household savings into capital. In today’s world, financial inconsistency prevails in every sphere. Accordingly, management and planning one’s financial destiny has turned out to be very essential for individuals in an unstable market. The stock market stands out as the most viable option for investment. Stock analysis and studies lie as the foundation of investing. Without it, the situation might be similar to strolling on the road blindfolded. Let’s comprehend the meaning and types of stock analysis.

Meaning of Stock Analysis

It is a holistic approach to evaluate and examine the intended trading instruments, individual stock, investment opportunities or an entire market trend. Modern-day investors are heavily relying on the resourceful analysis that empowers them to discover profitable stock. Consequently, investors or traders make their investment pursuits in accordance with the provisions of stock research. Sometimes, it is also called market analysis.

Moreover, market analysis is a perfect methodology to gain valuable insights into the market, various securities and an economy. It involves the assessment of present and historical data to predict the target stock prices.

Types of Stock Analysis

Well, if you are a stock market enthusiast, then surely you are curious to comprehend the various types of stock analysis. Furthermore, stock markets are highly unpredictable and if you don’t give decent time on substantial research, then it is just a game of fortune. However, with extensive research and expertise, you can make a hefty return on your investment.

The methodologies are primarily based on the tendency of the volatile market. This involves multiple aspects such as current market trend, volatility in the stock price, company’s P/L statements and balance sheets and so on. So, it is essential to analyse stock now, before setting foot into the stock market. The plurality of market analysis can be branded into three types- Fundamental, technical and sentimental. Let’s have a comprehensive look at each:

Fundamental Analysis

In layman’s language, the fundamental analysis is the comprehensive assessment of an individual stock to find its intrinsic value. The intended analysis is based on multiple factors such as external influences, industrial trends, the prevailing economic scenario, and financial statements. It is an attempt to forecast the tendency and the actual value of the target stock in the long run. The current stock chart or value does represent the actual value of the equity. It is the result of various underlying factors. Moreover, the primary objective of the analysis is to ascertain the essentials of a company, whether it is fundamentally sound and survives in the long run. Here is the list of factors that are the vital ingredients while performing fundamental analysis of the stocks:

  • Price-to-earning ratio (P/E)
  • Price-to-sales ratio (P/S)
  • Projected earnings growth (PEG)
  • Profit-to-book ratio (P/B)
  • Return on equity (ROE)
  • Dividend payout ratio

Technical Analysis

Technical analysis is the integrated assessment to predict the future tendency of the stock price based on historical trends. It doesn’t render an accurate price graph of the stock in the future but helps in anticipating the movements.

The method involves an observation of the statistical composition of a stock such as the chart patterns, trade volume, price fluctuation, average movement and so on. It purely relies on stock charts and statistical indicators to determine the stock price in the upcoming future. In general, the technical analyst pays meagre attention to the fundamentals of the company.

Sentimental Analysis

Sentimental analysis is the evaluation of the market trends based on the behaviour of the investors. The assumption of the masses influences the price variation of the stock. This analysis often leads investors into a pathway that is based on the sentiments. It is not supported by any observed facts or data and relies on the opinion of the majority.

Uses and importance of stock analysis

A famous saying “Success is where preparation meets opportunity”, the same holds true for analysis before delving deep into stock investment. Investors depend heavily on the analysis to discover profitable stocks. Stock research is a productive solution to address market uncertainties. It assists a prospective investor with resourceful insights regarding the future.

The stock market is shallow and without credible study, investors engage in a vicious cycle of loss and profit. In the end, they exhaust themselves with both capital and vitality. Effective planning and evaluation of a stock’s financial statements could make a huge difference for investors in this volatile market. Let’s take a glance at the significance of stock research and analysis:

  • Assist in forecasting the future price tendency.
  • Growth of a portfolio with a comprehensive understanding.
  • Reduces the dependency on fortune.
  • Demonstrates the fair value of stock and helps in detecting any red flags.
  • Helps in determining the financial strength of the company.

Wrapping up

Well, there is no simple answer. The stock market works in a sophisticated manner and there is nothing like a golden clue. As a matter of fact, the stock research provides a fair and clear picture of stock. Subsequently, helps in the decision-making while investing your hard-earned fortune.


Please enter your comment!
Please enter your name here