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    Security analysis involves gathering information about a stock, organizing it logically, and using it to determine the stock's intrinsic value. An investor should only buy if the market price is below this intrinsic value, which depends on future cash flows, discount rate, and performance risks. The top-down security analysis approach first analyzes the economy, then the industry, and finally the company's fundamentals and future expectations.

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    4. Security Analysis Slides

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    Security analysis involves gathering information about a stock, organizing it logically, and using it to determine the stock's intrinsic value. An investor should only buy if the market price is below this intrinsic value, which depends on future cash flows, discount rate, and performance risks. The top-down security analysis approach first analyzes the economy, then the industry, and finally the company's fundamentals and future expectations.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    7 views3 pages

    Security Analysis Slides

    Uploaded by

    rakan
    Security analysis involves gathering information about a stock, organizing it logically, and using it to determine the stock's intrinsic value. An investor should only buy if the market price is below this intrinsic value, which depends on future cash flows, discount rate, and performance risks. The top-down security analysis approach first analyzes the economy, then the industry, and finally the company's fundamentals and future expectations.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 3

    Lesson 4:

    Security analysis
    Security analysis of common stock

    Process
    • Gather information
    • Organise information into logical framework
    • Use information to determine intrinsic value

    Intrinsic value
    • Measure of the underlying value of a share
    • Good investor will only buy stock if market price < intrinsic value
    • Depends on several factors
    • Stock’s future cash flows
    • Discount rate
    • Risks associated with future performance
    Security analysis of common stock

    Top-down approach

    Step 1 – Economic analysis


    • Analyse the general state of the economy and potential effects on businesses

    Step 2 – Industry analysis


    • Overall outlook for the company’s specific industry
    • Company’s competitors

    Step 3 – Fundamental analysis


    • Current financial performance of company
    • Develop expectations of company’s future performance

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