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Equity Fundamental Analysis
Before going to understand what is equity fundamental analysis First we understand the what is fundamental analysis. Fundamental Analysis is a stock valuation method that uses financial and economic analysis to predict the movement of the particular stock prices.

The fundamental information that is analyzed can include a company's financial reports, and non-financial information such as estimates of the growth of demand for products sold by the company, industry comparisons, and economy-wide changes, changes in government policies etc.

Fundamental Analysis Tools
These are the most popular tools of fundamental analysis. They focus on earnings, growth, and value in the market. For convenience, I have broken them into separate articles. Each article discusses related ratios. There are links in each article to the other articles and back to this article. The articles are:


 * 1) * Earnings per Share  EPS
 * 2) * Price to Earnings Ratio  P/E
 * 3) * Projected Earning Growth  PEG
 * 4) * Price to Sales  P/S
 * 5) * Price to Book  P/B
 * 6) * Dividend Payout Ratio
 * 7) * Dividend Yield
 * 8) * Book Value
 * 9) * Return on Equity

Earnings per Share  EPS Earnings per share (EPS) is the portion of a company’s profit that is allocated to each outstanding share of common stock, serving as an indicator of the company’s profitability. It is often considered to be one of the most important variables in determining a stock’s value, and it comprises the “E” part of the P/E (price-earnings) valuation ratio. EPS is calculated as:

EPS = net income / average outstanding common shares

For example, McGraw Hill Financial Inc (MHFI) reported first quarter 2014 net income of $248 million and had 277.2 million average shares outstanding. To calculate EPS, investors can insert these figures into the EPS calculation:

EPS = $248 million / 277.2 million = $0.89

Companies may choose to buy back their own shares in the open market. In doing so, a company can improve its EPS (because there are fewer shares outstanding) without actually improving net income. For example, if MHFI in the first quarter had used a share buy-back program to buy 100 million shares, its EPS would have been:

EPS = $248 million / 177.2 million = $1.40

Note: some companies have a special class of stock called preferred stock. Any dividends paid on preferred stock would be subtracted from net income when calculating EPS. The formula for calculating EPS would then be:

EPS = (net income – dividends on preferred stock) / average outstanding common shares

In our example, MHFI had an EPS of 89 cents for the first quarter of 2014. Knowing the EPS of an individual stock is not enough information to make an informed investment decision. EPS becomes meaningful when investors look at historical EPS figures for the same company, or when they compare EPS for companies within the same industry. MHFI, for example, is in the Business Services industry, so investors could consider the EPS of other stocks within that industry, such as Moody’s Corp (MCO). Since EPS is only one number, it’s important to use it in conjunction with other measures before making any investment decisions.

"Notes" 