How to do a quick fundamental analysis of a stock?

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How to do a quick fundamental analysis of a stock?

Are you investing in stock markets for long term gains? Do you look forward to choosing the best companies which would continue scaling up despite economic uncertainties? Do you want to find out multi-baggers to grow your money multiple times? If yes, you should definitely understand fundamental analysis of a company. Although, there is a lot of content available on the internet about this, however most of it is either unstructured, complex or is oriented towards particular economies like United States of America. Thus, in this article, we have articulated how to do a quick fundamental analysis of a stock in a simple way.

By following this approach, within a small amount of time & with the right effort you may quickly filter out those winning companies where you may invest based on facts.

How to do a quick fundamental analysis of a stock?

Here is a step by step approach to quickly conduct fundamental analysis of a stock.

1. Getting the company information

There are multiple ways to get the information about the company. For e.g. you may want to look at the financial reports – P&L statements, Balance Sheets, Cashflow statements etc.

However, this task becomes overwhelming as you need to skim through a lot of information to figure out the right numbers. Also, we need to understand that, we are looking forward to ball park figures and they need not be exactly accurate.


This is the place to start your fundamental analysis. You need to simply visit this free of cost tool – here. You would land on page mentioned below.

Screener logo
How to do a quick fundamental analysis of a stock by using screener?

Now, this is the place where you will quickly get organized data for fundamental analysis of a stock. In case, you don’t find information about a particular company or if you want to cross verify, you can also check MoneyControl.

Further while analyzing the companies, you need to look at consolidated numbers of a company and not just standalone numbers. There are companies where you won’t find consolidated numbers and should go for standalone figures in these cases.

2. Categorizing the company

The first thing you need to look at after searching for the company is its Market Cap. Based on this number, you classify whether the stock is large cap, mid cap or small cap.

For e.g., here we have searched about Bajaj Auto and you can see its market cap is Rs 69377 Crore.

Market cap is the value of total shares outstanding. (Quantity of shares*share price). Thus with changes in the price or quantity these numbers would change. However, we are looking at only ball park figures, so you need not worry. You need to only categorize the company and move on.

How to do a quick fundamental analysis of a stock by using screener?

Here is how companies are classified based on Market Cap in India ->

Large Cap > 10,000 Crore

Small Cap <5,000 Crore

Mid Cap > 5000 Crore < 10,000 Crore

Large Cap are established companies and known brands in the industry. On the other side of the spectrum, small cap companies are less proved models for scaling up and there might be a few winners that emerge in the long term. If you are looking for a multi-bagger, you would find them in both cases.

3. Profit after tax or Profit Margin

One of the best indicators of a fundamentally strong companies is the ability to generate consistent profit. So, you must next check out what is the final profit margin of the company.

For e.g. In case of Bajaj Auto, for march 2019 their PAT% is 16%. You get this by dividing Net Profit = 4928 by Sales = 30,250. You can check it out for last 5 years for consistency.

How to do a quick fundamental analysis of a stock by using screener?

Now if you check it out for another player in this industry – Heromotocorp, you would appreciate the importance of PAT margin. In case of Heromotocorp for FY 2019, PAT margin is 10% (3444/33971). So we see that, Bajaj auto is fundamentally doing well on this number.

How to do a quick fundamental analysis of a stock by using screener?

4. Operating profit margin – OPM%

In addition to PAT%, which shows the overall performance of the company, you should also check out the OPM%. This number tells you quickly about how efficiently the operations of company are running to bring out the products or services in the market. If this number is consistent or increasing, this signals a very strong hold of the company in the market.

From images above, OPM% for Bajaj Auto is 16% & Heromotocorp is 15%. Operationally both the companies are doing a good job, though bajaj auto is slightly better off in previous years.

5. Debt to equity

The above two parameters may give you a lot of confidence about your decision making. If you club these numbers with debt to equity ratio, you would get a cherry on the cake.

For Bajaj Auto D/E ratio is 0.01 & Heromotocorp it is 0.02.

If the numbers are below 1, companies are doing a good job, below 0.5 is much better and if they are debt free and can still scale, that is the best.

Note – companies may use debt for growth, however it should be utilized properly. This information if the debt is utilized properly is difficult to get and guess.

How to do a quick fundamental analysis of a stock by using screener?

6. 5-year Return on Equity

Finding out information about the management of the company is difficult, but by looking at 5-ROE, you may check of the equity stakeholders are getting good returns on their investment. Companies with 5-ROE above 25% are doing a really good job.

For e.g. for heromotocorp this number is 33.35%.

How to do a quick fundamental analysis of a stock by using screener?

7. Finalizing your shopping with P/E ratio or Price Equity Ratio

Once, you have a shortlist, you may figure out how expensive the stocks are based on P/E ratio. Generally 15 is good benchmark and you may buy below 15. However, good stocks have higher demand and thus the P/E ratio may be quite high.

Heromotocorp – P/E Ratio – 11.4

quick fundamental analysis of a stock - Heromotocorp

Bajaj Auto – P/E Ratio – 13.81

quick fundamental analysis of a stock - Bajaj Auto

Also you can take advantage of averaging on your investments across different P/E ratio touchpoints.

Further, you may utilize the monthly technical charts for buying. (optional).

Concluding remarks on how to do a quick fundamental analysis of a stock?

You may collate the data is a simple excel file and compare companies working in the same industry & similar offerings in the market.

With these checks and balances, you would avoid selecting those companies which are factually, not fundamentally strong.

Here is a sample collection of data for few companies for reference –

Comparison of stocks based on fundamental analysis.

Disclaimer – The view and analysis presented here is based on independent estimates and assumption by Fintox. The reader must rely on self – judgement for making an investment decision.

If you want to check about a sample fundamental analysis of a stock click here – Multibase India – Fundamental Analysis.

In case you are planning to invest in stocks you may check our section on stock market for details. To know about new age investments like P2P lending visit details on p2p lending and investments.

To know more about the economy and investment options like equity, mutual funds, debt – check our post on “How to start investing“and “A Wealth Snapshot of India

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Post Author: Fintox_India

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