What are the methods of stock analysis? Which is better, fundamental analysis or technical analysis?

Important percentage figures

Certain percentages are useful in analyzing and comparing stock-issuing companies. For example, financial ratios provide a quantitative measure of a company’s operating performance and financial health, and value ratios help investors determine whether the stock price is reasonable. These ratios may be meaningless to the company itself, but when compared with the company’s past figures, or even compared with other companies in the same industry, these figures may reveal extremely important information.

Return on assets (ROA): An indicator of a company’s profitability relative to its total assets. Return on assets (ROA) provides a basic concept of a company’s ability to use its assets to create economic benefits. The ratio of the company’s annual total income divided by its total assets is the company’s return on assets, sometimes also called “return on investment.”

Return on equity (ROE): A measure of whether a company is profitable. It represents the company’s ability to generate profits using the money invested by investors. The ratio of a company’s net income divided by the total number of shares is the return on equity (ROE). The return on equity is an important figure for comparing the profitability of companies in the same industry.

Price-to-earnings ratio: The number obtained by dividing the share price by the earnings per share. This number is probably the most commonly used measurement method. It can be used to compare the company’s recent or future earnings per share level. When considering the price-to-earnings ratio, investors should compare the current and past price-to-earnings ratios of the stock, and also compare the price-to-earnings ratios of other companies in similar industries. When evaluating this number, the impact of various possible changes on the number should be considered, such as the rate of change in expected future earnings.

Diversification – Don’t put all your eggs (money) in one basket (stock)

Diversification is a risk management technique that combines a wide variety of investment products into one portfolio. The mechanism is to minimize the impact of a single stock on the overall portfolio by spreading funds across different stocks. In this way, if a stock or part of the investment unfortunately fails, your loss is limited.

Small Cap Stocks

According to the definition of the U.S. Securities and Exchange Commission (SEC), stocks with a trading price of less than $5 per share are small-cap stocks, also known as micro-cap stocks. These stocks are traded on the Pink Sheets market or the OTCBB. Most small-cap stocks cannot provide many important information that investors need. These stocks traded on the OTCBB and Pink Sheets do not need to meet the minimum standards for listing and trading, and companies listed on the Pink Sheets do not need to register with the SEC. Therefore, if any problems occur in these companies, investors are not protected. The investment return rate of small-cap stocks is generally higher than expected, but the risk is also higher than stocks listed on the stock exchange.