What Is Fundamental Analysis? (Revenue, EPS, Growth)

📄 The Report Card

Income, Balance Sheet, & Cash Flow

Looking Under the Hood

Fundamental Analysis ignores the stock chart and looks at the business itself. To do this, you analyze three specific documents released every quarter.

Income Statement: Shows Revenue (Sales) minus Expenses. The bottom line is Net Income (Profit).
Balance Sheet: A snapshot of what the company Owns (Assets) vs. what it Owes (Liabilities/Debt).
Cash Flow Statement: The truth serum. It shows actual cash entering and leaving the bank account. (Harder to fake than profit).

Live Example: The Fortress Balance Sheet

BRK.B (Berkshire Hathaway) $483.50 ▲

Warren Buffett's company is famous for having massive cash reserves ($150B+) and low debt on its balance sheet.

🏰 The Economic Moat

Competitive Advantage

Protecting the Castle

A "Moat" is a durable advantage that prevents competitors from stealing customers. Without a moat, high profits always attract competition.

Brand Power

Pricing power. People pay more just for the logo.

Switching Costs

It is too painful/expensive to leave the ecosystem.

Live Example: The Ultimate Moat

AAPL (Apple Inc) $258.28 ▲

Once you buy an iPhone, Watch, and store photos in iCloud, the "Switching Cost" to move to Android is incredibly high.

⚖️ Price vs. Value

Is it Cheap or Expensive?

Don't Overpay

A great company can be a terrible investment if you pay too much for it. Valuation metrics help you decide if the price is fair.

P/E Ratio: Price-to-Earnings. How much you pay for $1 of profit.
P/S Ratio: Price-to-Sales. Used for companies that aren't profitable yet (Growth stocks).
Intrinsic Value: The calculated "real" worth of the company based on future cash flow.

Live Example: Valuation Check

GOOGL (Alphabet Inc) $192.50 ▲

Often analyzed by comparing its P/E ratio to its growth rate (PEG Ratio) to see if it's undervalued.

🚩 Warning Signs

When to Run Away

The Danger Zone

Fundamental analysis is largely about avoiding losers. Watch out for these killers:

Dilution: The company keeps printing new shares to survive. This makes your slice of the pie smaller and smaller.

Declining Revenue: The business is shrinking. Even if profits look okay (due to cost cutting), shrinking sales is a death sentence.

🔗 The Investor's Mindset

Think like an owner, not a trader.

Long Term Focus

In the short run, the market is a voting machine (Technical). In the long run, it is a weighing machine (Fundamental).

Management

Always check Insider Ownership. If the CEO is selling all their stock, why should you be buying it?

Educational content only. Prices as of Jan 31, 2026. Not financial advice.

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