Analyzing the state of a particular company is the duty of anyone who wants to deal with the American market knowing the current industry rankings and giving you basic considerations in company analysis.
Perhaps the first step to identifying a company’s future is to analyze historical data on sales and profits, for example, changes in sales growth rates between past and present assist the analyst in determining its current and future stages. firms, as well as analysis of these two variables helps to determine the range of firms exploiting periods of prosperity and their ability to overcome periods of recession.
If historical data has shown weaknesses in the company’s capabilities in both cases, there is no justification for assuming the capacity to do so in the future should also pay close attention to the vagaries of growth, the more volatility in the growth rate each time This means increasing the risk of investing in the industry and seeking company, where sales growth will continue to increase steadily.
Attention should also be paid to Particular Company profit growth in addition to sales growth because rapid sales growth does not guarantee high profits unless there is good control over costs from the company’s management and there are several financial ratios. that are factored in in this area to measure profitability such as the rate of return on shareholder rights and operating profit margins
Second: – the demand for the size of the company’s products
One important aspect that fundamental analysis must pay attention to is studying the demand for and supply of a company’s products. It is very important to know whether the demand for a company’s products is increasing, decreasing, or not changing. Likewise, if the available capacity of a company is able to cover the potential increase in demand and if its energy is insufficient to meet demand, this means that this is a precursor to the entry of new producers, which could result in a significant increase. in supply and the intensification of competition between these companies, which leaves a disastrous impact on the company’s profitability and the corresponding share price.
competition conditions
To find out the competitive conditions in the future, the analyst asks himself whether there are barriers to prevent the entry of new companies in the same industry and these barriers are determined by several advantages:
1- Differentiate the company’s products Particular Company and here it will be difficult for new companies who want to enter this field to sell products that must be different from the first product.
2- Reducing costs and this means that new competing companies, which will have high costs in the initial years because of their need for large quantities for advertising and advertising, will find it difficult to enter this industry and what is meant by lower Cost of the company is its ownership over, for example, patents or ownership of sources of raw materials or easy access to financial resources or a better ability to negotiate with sources of supply of raw materials and equipment, and based on these and other advantages, companies can achieve higher Particular Company profit margins than companies anything new.
3- The possibility of large-scale production. In some companies, it is not possible to obtain profits except in the case of large production, for example, the automotive industry and the iron and steel industry. In this industry, new companies must be able to extract a portion from existing companies that is sufficient to operate equipment at a level that guarantees covering costs and making a good profit. Perhaps this explains the small number of companies in such an industry because it is difficult for a newcomer to create conditions that will allow him to survive and move on.
So, in short, when I want to buy from a certain company, I have to know the required industry first. and then study sales growth and profit growth and then study order size on the company’s products, then study the competitive forces for the company, and in the Particular Company next episode, the other two elements will be explained
Then we study and analyze the company’s financial position and estimate future profits, with the hope that this series of lessons will be useful and not boring.