Fundamental Analysis Explained: How to Choose the Right Stocks

Tired of gambling on stocks? Learn how I use fundamental analysis to invest with confidence.

Scroll. Click. Hope for the best.

No real plan. Just vibes.

That was me in my early 20s — investing based on headlines, Reddit threads, and gut feelings. Sometimes I won. But mostly… I didn’t.

One day, after watching another “promising” stock tank, I sat down and said: “There has to be a better way.”

And there was.

It’s called fundamental analysis — and it’s not as boring or complicated as it sounds. In fact, once I understood it, it completely changed the way I invest.

📘 What Is Fundamental Analysis?

Imagine you’re buying a small coffee shop.

Would you:

• Look at how much money it’s making?

• Check its debts and expenses?

• Make sure it has loyal customers?

  
  

Of course you would! That’s exactly what fundamental analysis is — except for stocks instead of lattes.

It’s about looking at the real numbers behind a business, so you’re not just buying hype — you’re buying value.

🔍 Why Most People Skip It? (and Why You Shouldn’t)

I get it — it’s easier to chase stock tips or follow trends. But here’s the truth:

💸 Trends make traders rich. Fundamentals build wealth.

If you want to invest like Warren Buffett, not like a gambler in Vegas, this is where you start.

🧩 The 5 Numbers I Always Check Before Buying Any Stock

You don’t need a finance degree or fancy tools. Just these five simple pieces of the puzzle:

1. Earnings Per Share (EPS) — aka “Is this company making money?”

EPS = (Net Income — Preferred Dividends) / Average Outstanding Shares

What it tells you: How much profit a company makes per share of stock.

2. P/E Ratio — aka “Am I overpaying for this stock?”

P/E Ratio = Current Share Price / Earnings Per Share (EPS)

What it tells you: How much investors are willing to pay for each dollar of earnings.

3. Debt-to-Equity Ratio — aka “Is this company drowning in debt?”

Debt-to-Equity = Total Liabilities / Shareholder Equity

What it tells you: How much debt a company uses to finance its operations relative to equity.

4. Free Cash Flow (FCF) — aka “Do they have money left over after bills?”

Free Cash Flow = Operating Cash Flow — Capital Expenditures

What it tells you: How much cash is left after paying for basic business operations and investments  -  the money available for dividends, debt repayment, or reinvestment.

5. Return on Equity (ROE) — aka “How smart is this company with its money?”

ROE = Net Income / Shareholder Equity

What it tells you: How efficiently a company is using its investors’ money to generate profit. The higher the ROE, the better the company is at turning equity into income.

🎯 Real Talk: How I Use This in Real Life

Let me tell you about one of my favorite finds.

Three years ago, I was eyeing a company everyone ignored. Boring industry. No headlines. But its EPS was growing, debt was low, and its ROE? Off the charts — the company was putting investor money to work better than most of its competitors.

I bought in — and after this april crash, the stock doubled.

No hype. Just solid fundamentals.

🧰 My Favorite Free Tools for Stock Research

You don’t need to spend a dime to get started. Here’s what I use:

• Live Mint → Great for context before doing deeper fundamental analysis

• Screener / Ticker → Analyzing Indian stocks.

• Yahoo Finance / Morningstar → Analyze U.S. or global stocks. 

• Groww / INDmoney → Invest with ease and manage goals

Let me know if you use some other tools. Would love to explore.

🚩 Red Flags I Avoid Like Bad First Dates

• Negative earnings for years

• Massive debt with no plan

• Crazy-high P/E with no growth

• Companies I don’t understand

If I can’t explain what the business does in 30 seconds, I don’t invest. Period.

👊 Bottom Line: Boring Beats Flashy

I know it’s tempting to chase the next Tesla or meme stock. But here’s what I’ve learned the hard way:

“Boring, profitable companies make rich investors.”

Fundamental analysis might not be flashy. But it works. It gives you the power to make decisions based on data, not drama.

You’ll sleep better. You’ll make smarter moves. And over time — you’ll win.

🧠 Final Thought: You Don’t Need to Be Perfect — Just Consistency!

You’re not trying to be the next Buffett overnight. You’re just trying to make smarter decisions, one stock at a time.

And this is how you start.

Thanks for reading my thoughts & as always, rooting for you from afar.