Fundamental Analysis For Dummies, 2nd Edition

Chapter 17

Pinpointing Trends Using Fundamental Analysis

IN THIS CHAPTER

Understanding why financial trends are an important aspect of fundamental analysis

Discovering several popular methods to pinpoint trends in a company’s fundamentals

Spotting trends in legal insider trading information and what they indicate

Using computerized screens to help spot notable company and industry trends

It’s too bad financial statements don’t come with crystal balls. It would be much easier to divine the future of the company if you could just stare into a clear glass sphere rather than digging through financial statements.

Predicting the future earnings and revenue of a company is a big part of what fundamental analysts are trying to do. No one can predict the future — even if you do have a crystal ball. But fundamental analysis provides tools you can use to guess how profitable companies might be next year or beyond. That information will, hopefully, help you determine whether an investment is worth buying.

Monitoring financial trends is an important aspect of trying to forecast a company’s future. Studying how a company has done, while not necessarily an ironclad predictor of its future, can give you a decent idea of what to expect. At least it’s a place to start.

This chapter will drill down even further into how you can analyze a company’s historical fundamentals to get a decent expectation for the future. Specifically, you will examine how to build a long-term index-number trend analysis ...