The Very Basic of Fundamental Analysis

³ Fundamental Analysis

³ The Very Basics

³ Fundamentals: Quantitative and Qualitative

³ Quantitative Meets Qualitative

³ The Concept of Intrinsic Value

³ Criticisms of Fundamental Analysis

³ Business Model

³ Competitive Advantage

³ Management

³ Conference Calls & Management Discussion and Analysis (MD&A)

³ Ownership and Insider Sales & Past Performance

³ Corporate Governance

³ Financial and Information Transparency & Stakeholder Rights & Structure of the Board of Directors

³ Customers & Market Share

³ Industry Growth & Competition

³ Regulation


Industry Growth

One way of examining a company's growth potential is to first examine whether the amount of customers in the overall market will grow. This is crucial because without new customers, a company has to steal market share in order to grow.

In some markets, there is zero or negative growth, a factor demanding careful consideration. For example, a manufacturing company dedicated solely to creating audio compact cassettes might have been very successful in the '70s, '80s and early '90s. However, that same company would probably have a rough time now due to the advent of newer technologies, such as CDs and MP3s. The current market for audio compact cassettes is only a fraction of what it was during the peak of its popularity.

Simply looking at the number of competitors goes a long way in understanding the competitive landscape for a company. Industries that have limited barriers to entry and a large number of competing firms create a difficult operating environment for firms.

One of the biggest risks within a highly competitive industry is pricing power. This refers to the ability of a supplier to increase prices and pass those costs on to customers. Companies operating in industries with few alternatives have the ability to pass on costs to their customers. A great example of this is Wal-Mart. They are so dominant in the retailing business, that Wal-Mart practically sets the price for any of the suppliers wanting to do business with them. If you want to sell to Wal-Mart, you have little, if any, pricing power.


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