Use fundamental analysis to direct your investments towards companies with high growth potential
Investing in the stock market is a marathon, not a sprint. To be successful, it is crucial to choose businesses that are not only doing well today, but also have the potential to grow and prosper in the long term. This requires careful analysis of certain key indicators of their financial health. Here are five fundamental indicators to watch for growth opportunities.
1. Revenue Growth
Revenue growth is often the first metric investors look at when judging the health of a company. A steady increase in turnover means that the company is producing something that the market wants and in increasing quantity. This indicator is even more relevant if analyzed over several years, because it shows the company's ability to increase its sales despite market fluctuations.
2. Operational Result
Operating income, or operating profit, reflects the company's profitability before interest and taxes are calculated. It shows how much the company actually earns from its core operations, without taking into account the sometimes misleading effects of financing decisions or exceptional items. A steady increase in this figure is a sign that the company is well managed and its core business is strong.
3. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
EBITDA gives a clear idea of a company's operating performance by excluding non-cash elements and tax and financial factors. This indicator helps understand the company's cash generation from its core activities. An increasing EBITDA indicates an increased ability to generate profits and, by extension, sustainable growth potential.
4. Free Cash Flow
Free cash flow is the money a company has on hand after covering all its operating and investment costs. It is crucial because it shows the company's ability to self-finance its expansion, repay its debts, and return value to shareholders in the form of dividends or share buybacks. Positive free cash flow is often an indicator of strong financial health and future growth.
5. Net income
Net income represents the company's total profit after all deductions (operational, interest, taxes, and others). This is the amount that can be reinvested in the business, distributed to shareholders or used to reduce debts. Stable, sustained growth in net income over multiple periods signals a business that is not just surviving but actually thriving.
These indicators are not just numbers to be looked at in isolation; they interact and complement each other to provide a complete picture of a company's financial health and growth potential.
On Moning, you will find all these indicators clearly within each Action sheet.
Go further with Moning Growth Score
The Moning Growth Score, exclusively available to Moning Pro members, condenses a dozen of key financial indicators, including the indicators we just saw previously: revenue, EBITDA, and more, in a single score out of 20.
Clearly displayed on each action sheet, this rating allows you to quickly assess the growth potential and financial solidity of a company. This scoring system simplifies fundamental analysis, helping you make informed investment choices with ease, speed and accuracy.
Simplify your Selections with the Advanced Screener
Thanks to Growth Score, Moning Pro users can also filter stocks effectively in our advanced screener. By selecting companies based on a high growth rating, you target those with the best prospects for future performance.
This filtering by a single parameter transforms the search for investment opportunities, making the process both fast and strategically focused.
By being a Moning Pro member, you can invest smarter, based on robust analytics and a cutting-edge algorithm.
