Definition and Examples of Stock Analysis

Stock analysis is the process of examining companies/assets to provide investors with insights into what to expect from specific stocks. Also known as equity analysis, it can be categorized into fundamental analysis and technical analysis, or a combination of both.

Fundamental Analysis

Fundamental stock analysis focuses on a company’s fundamentals, which includes business and financial information that influences stock prices. For instance, analyzing a company’s quarterly revenue growth can help predict if a stock is a good investment. Analysts use financial statements like the balance sheet, income statement, and others to prepare ratios and metrics for analysis.

Technical Analysis

Stock analysis may also involve technical analysis, where technical indicators related to stock trading are analyzed instead of focusing on underlying business information. Reviewing a stock chart to determine its trading patterns, for example, falls under technical analysis. This information can guide investors on when to buy or sell a stock.

Stock Analysis Applications

Stock analysis can be applied to broader analyses of industries or the stock market as a whole. However, these assessments are referred to separately as sector analysis and stock market analysis, respectively. Stock analysis plays a crucial role in helping investors make informed decisions on where to invest their money.

How Stock Analysis Works

Stock analysis is essential for individual investors who are considering investing in specific companies. By examining stock analyses available on trading platforms and investment sites, investors can gather insights to help them decide whether to buy, sell, or hold a stock. Stock analysts may provide recommendations and price targets to assist investors in their decision-making process.

Implications for Individual Investors

It is vital for individual investors to review analyst reports but also come to their conclusions. While stock analysis reports can provide valuable insights, investors should not solely rely on them when making investment decisions. Conducting thorough research and considering various factors is essential for making informed investment choices.