Question

What are the different sources that can be used to predict future performance of the securities?

Answer 1

There are basically two types of analysis for predicting future movement of securities-

A. Fundamental Analysis-

This is the process of looking at a business at the most basic or fundamental financial level.

The tools of fundamental analysis are :-

(I) Earning per share - Earning per share is calculated to know how much a company is earning for it's shareholder. The Higher the Ratio is, the better it is

(ii)Price to earning ratios - This ratio compares the current share price of a company's stock to it's share earnings.

(iii) Projected earning growth- PEG reflects the future earning growth rate of the stock and this is like a forward earning.

(iv) Price to sales ratios : -The price to sales ratio values a company's stock price as compared to its revenues.

(v) Price to book ratio :- this ratio compares the book value of share to the market price of the stock

B. Technical analysis- This type of analysis involves inclusion of technical tools to decide the future direction of a company. It includes various tools like-

1. Moving average- This average tells about the closing price trends of shares during past to arrive at a future projection.

2 . Volume weighted share price is another factor which combines with two aspects of a stock - volume with share price of past to arrive at a future projection.

3.Volatility- Vix ratio tells about the volatillity of a particular index and how volatile a stock can be in future.

4 Support and resistance Analysis- It helps in finding support and resistance levels of a stock. The shares are bought at support and sold at resistance.