There is an old saying “Look before you leap” and this fits perfectly when you are investing in stocks. However, in-stock investment, mere looking won’t be enough, you need to dig deeper using multiple analytical tools and resources, and techniques for making your investments full-proof.

The stock analysis involves multiple techniques to find out whether an investment is right for your portfolio or not. If you are a trader, then you can use technical analysis tools to find yourself the best stocks to trade for the day.

Investing in stocks without thorough research about the company, stock price, and market trend can lead to a huge loss. For a good investment, you need to know about the stock you are putting your money into.

This is quite similar to buying an expensive asset, for instance, a car. Don’t you compare multiple cars within your budget and then choose the one which suits your requirement the best?

Stock investment is nothing different, you need to find the best stocks for your investment goals and profile and you need stock market analysis techniques for the same.

In this article, you will find different aspects of stock analysis. The article will have different stock market analysis techniques, metrics, and tips for investors, stock analysts, and anyone who wants to learn about stock market analysis.

How to Analyze Stocks to Get Good Returns:


Steps by step process on how to analyze a stock

Stock analysis is a process and involves multiple steps. It starts with the collection of data from different company documents and then finding the required information from them. T

hen comparing that information and analyzing multiple metrics and risks involved in the stock investment.

The steps are discussed in detail below –


1) Collection of financial data and company information


The first step in stock analysis involves document research. You need to pull out multiple documents that the company files with SEBI. The documents should include financial reports – quarterly, annual, and other financial data.

The balance sheet, P/L statement, and the cash flow statement of the company are key documents that need to be studied for qualitative research.

This will help you find out the revenue they are generating, their expenses, profit, and how they are handling cash flow. These documents are the basic requirement for beginning your research.

If you are not able to find the documents by yourself, you can ask your broker to find them for you. Often you can find the financial reports on the trading terminal you are using as a brokerage house upload the same on the trading software.

However, you can find them easily on the company’s website anytime.



  • Choice of analysis

The next step is to decide whether you want to do fundamental analysis or technical analysis. This choice depends on whether you are trading stocks or investing in them.

If you are investing for a longer duration, you must go for fundamental research, and if trading, then technical analysis with a bit of knowledge about the company’s financials can help.


a) Fundamental analysis:


Fundamental analysis of stocks is about finding the intrinsic value of the stock and evaluating whether it is overvalued or undervalued. It is assumed that the market value of the share doesn’t always reflect the actual value of the company.

So, fundamental research is performed to find the right value. If the share is undervalued, then there is a scope for investment.

Fundamental analysis can be further categorized under two section namely –


i) Quantitative analysis involves the numbers and ratios that can be obtained from the financial statements of the company. For instance, the profit, revenue, sales numbers, or the P/E ratio or debt/equity ratio, and others.

This analysis can be very simple as well as highly complicated given the nature of the data you are analyzing. Quantitative fundamental analysis helps in understanding the entry and exit points in the stock market.



ii) Qualitative analysis involves the factors that affect share price but cannot be expressed in numerical form. For instance, management decisions, competition in the industry, the performance of the directors in the company, and other similar factors.

Decisions taken by the management can easily swing the price of the share but these factors intangible, unlike quantitative factors. However, qualitative analysis is also crucial for evaluating the value of the share.


There are multiple components of fundamental analysis which you need to be aware of before you start analyzing the stocks. They are –

  • Earnings per share or EPS which measures the profitability of the company
  • Price to Earnings Ratio or P/E ratio which tells about the valuation of the share is correct or not.
  • Price to Book Ratio or P/B Ratio which is also used for finding the valuation of the company.
  • Debt to Equity Ratio or D/E ratio that says about the indebtedness of the company.
  • Return on Equity or ROE tells about the profit generated using the equity invested by the shareholders.

There are other metrics that we will be discussing in detail in the latter part of the article.

Now let us see how to do fundamental analysis or how you can find the intrinsic value of the share which is the primary goal of fundamental analysis.

So, there are three processes out of which you can choose the one that suits your requirement.


Here is the Top 5 things to Know about Stock Market. Know these things about Stock Market


i) Relative Value Models (Multiplier)

If the company is pretty new, or you are not able to fetch all the details about the company then you can opt for relative valuation. In this process, the market price of the share of its peer companies is first taken into consideration.

Then the price is compared to the peer company’s fundamentals like sales number, net income, or book value of equity. The ratio which is obtained is applied to the company you are researching.

These ratios are known as price multiples and can be used for finding out the relative value of the question share.



ii) Present Value Models

This is a discounted cash flow method where the projected future earnings are discounted by a specific rate to get the present value of the share.

Apart from free cash flow, dividends or residual income can also be discounted for finding the value of the shares.

This is the most popular method of finding the intrinsic value of shares under fundamental analysis.



iii) Asset-based Valuation:

Finally, we have asset-based valuation which involves the company’s assets and liabilities. The market of total liability of the company (excluding equity) is deducted from the total value of the asset of the company to derive the value of total equity.

However, this is an obsolete and rarely used method.


In fundamental analysis, you need to keep few things in mind apart from finding the intrinsic value. You need to –

  • Check and analyze the prospects of the company, its business plans, expansion ideas, and others.
  • Check the debt of the company and also compare the same with the peer companies.
  • A study of the rival companies is necessary for fundamental analysis.

Here is the Complete guide on How to Read a Stock Table/Quote? Understanding Stock Quote

b) Technical Analysis:

This analysis involves market price movement, historical prices of the stock, and other statistics available in the stock market itself. if you are wondering how to do technical analysis of stocks, then here are few insights about the same.


The basic idea behind Technical analysis is to identify the market trend and predict whether the price is going to increase or fall. Here, historical data are used for predicting future prices.

Some of the most popular technical analysis tools include –

i) Moving Average:

This is used for understanding the average price movement in the stock. It is tough to keep a track of the original price movement daily, so taking an average helps. You can use the simple moving average or the exponential moving average.

While the former is calculated by taking the closing prices of the stock for a given period and summing them up and then dividing it by the number of days for which the prices are included.

The latter uses the weighted-average method and prioritizes the recent prices a little more by weighing them more.


ii) Support and Resistance levels:

These are used to understand the price trend of the share. Whether the stock is bullish or bearish.

If the support level is broken, which is the lower end of the price (the demand is high enough to keep the price above this level) then the stock is being bearish and can fall drastically.

On the other hand, the resistance level is about the maximum price level where the selling pressure is maximum and if that is broken, then the stock becomes bullish and can increase in price exponentially.


Check out our course on Technical Stock Analysis to evaluate your investments and identify trading opportunities


iii) Charts and trading indicators:

There are multiple charts which include candlestick charts, line charts, bar charts, and others to understand the trend in the market and for the stock in question. The charts along with trading indicators can help you understand the entry and exit points in the market.


There are many other different factors and tools which are put to use by the traders for stock analysis.


  • Metrics for analysis

In the above two-section, you have read a little about the metrics which are used to determine the price of stock while performing stock analysis. Here we will discuss the most important metrics which are used in the analysis process of stocks.


  • P/E ratio:
    Price to earnings ratio is one of the most important metrics that are used by analysts for stock analysis. This is derived by dividing the market price of the share by its earning per share/EPS.This is used for comparing companies within the same industry and having similar prospects in terms of growth and revenue generation. This metric suggests the amount of amount (share price) the investor is willing to pay for earning $1 out of the company’s recent earnings.This metric might be a little flawed as well as analysts often focus on the short-term, so better use other metrics along with the P/E ratio for correct evaluation.


  • Revenue:
    It is the value which the company has earned in a specific duration say in a year by selling its products or services.Revenue is another top metric that needs to be analyzed when researching the stock/company as it says a lot about the company’s operation. Revenue can be divided into operating and non-operating revenue.Operating revenue is generated from the business the company does and thus it tells about how well the year went in terms of sales and profit generation.


  • EPS:
    Earning Per Share is one of the crucial metrics that are regarded as stock market fundamentals and it is derived by dividing the recent earnings (net income) of the company by its outstanding shares (shares available for trading in the stock market).EPS helps in comparing the company’s profitability with other companies as the earning is divided into the number of shares. However, this earning can include the dividend as well which the company may not pay to the shareholders.In such a case, automatically the EPS increases but then it doesn’t show a perfect picture of the profitability of the company as the shareholders are being deprived.


  • Net Income:
    This is the amount that is left after paying all the operating expenses, depreciation, and taxes out of the revenue generated. So, if this number is increasing on a year-on-year basis, then the company is growing and vice versa.


  • ROE:
    Return on Equity helps you understand how much the company can generate with the shareholder’s equity. It is expressed in percentage and derived by dividing Net income by shareholder’s equity.


  • ROA:
    Return on Asset is the profit generated by using the asset of the company. it is also expressed in percentage and derived by dividing the net income by the value of the total asset of the company.


  • P/B Ratio:
    Price to Book Value or ratio helps investors find the high-growth companies which are undervalued. This ratio is derived by diving the market price of the share by the book value of the company. Book value means the total amount that can be retrieved if all the assets of the company are sold and the liabilities are paid off.


  • PEG Ratio:
    This ratio is about the price to earnings growth which tells us about the growth in earning of the company and the stock is considered to be valuable if this ratio is less than 1. It is derived by dividing the P/E ratio by the growth rate of twelve months.




3) Market analysis:

Stock analysis is beyond numbers. If you want to thoroughly analyze the stock and the company, you need to focus on the below-mentioned factors as well –

i) Competitive Advantage:

Long-term investors want assurance of the durable competitive advantage of the company. Whether the company can sustain itself in the long run or not, whether its parent company can protect it if such a scenario arises, pricing power and many other factors are being considered before investment.


ii) Market trends:

Industry or market trend plays a great role in the stock price movement. If the industry has the potential to grow in the future, then the stocks in it would share the same or at least a part of its growth.

For instance, the industries which are expected to outgrow others in the future include Artificial intelligence, fintech, healthcare, cloud computing, and similar industries. So, investing in the stocks of these industries can be profitable in the long run.

iii) Analysis of the management:

Finally, one of the most important thing that the investor and the analysts need to consider is management’s performance.

A company is run by the management and thus their experience, performance, expertise needs to be carefully analyzed.


iv) Risk analysis:

Whether you opt for fundamental analysis or technical, you need to do risk analysis before actually investing in the stock.

You need to analyze the risks of investment such as the emergence of a potential competitor, new technology making the business obsolete, or poor decisions by management and others. All these negatively affect the business and thus you need to have a provision in your investment plan for the same.

v) Putting everything together:

So, once you have done your research, it is time to put everything on the platter and evaluate and take the call. You need to have the context right and put your research together according to the context of your investment.

If you are looking for long-term investment, you need to check the durable competitive advantage, management’s performance, along with quantitative metrics. If you are looking for a short-term investment, then the numerical metrics can be enough along with market trend analysis.


Learn How to do Value Investing by taking this course from Koppr.



Stock analysis is a non-negotiable factor while investing in stocks. If you are wondering how to analyse stocks by yourself, then you can follow the above-mentioned steps and you can conduct your research.

There are innumerable metrics that you can put to use but you need to relate your research to your investment goal and for that, you need to find the context of investment right.

Both quantitative and qualitative factors hold equal importance while investing and thus you cannot overlook either.

Do you have any questions related to Stock Market? Koppr Tribe is here to answer all your questions. Join our Tribe Now. Download the Koppr App