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Fundamental analysis: 5 must-have tools for valuing stocks

Steer clear of risky, uninformed trades with fundamental analysis tools designed for value investors.

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Jennifer Gimbel

Updated

Fact checked

To buy a company’s stock, you should know something about the company. Often, you don’t need to look much further than a company’s financials to determine whether it’s a good fit for your portfolio.

Many stock trading platforms offer tools for conducting fundamental analysis—which is key to figuring out if a company is worth backing.

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First up: What’s fundamental analysis?

Fundamental analysis is a method of valuing a stock based on financial data and the company’s history like its balance sheet, revenue, profitability and earnings per share (EPS). A stock’s price isn’t always an accurate representation of its value.

Some stocks are overvalued—others are undervalued. Fundamental analysis can help you uncover a stock’s true value to identify prime opportunities for long-term growth.

Fundamental analysis is one of two ways to value stocks. The other method—typically employed by active traders—is technical analysis. This form of analysis relies on sophisticated charting tools to analyze a stock’s price history and movement.

Technical analysis can be useful, but is better suited to short-term trades rather than long-term investments.

5 tools to use when valuing stocks

High-quality tools are the key to well-informed trading decisions. These 5 fundamental analysis tools are ideal for the value investor seeking top-notch data.

1. Company financials

Company data goes far beyond its valuation and stock price. To get an accurate picture of a company’s financial health, you need to dig into the details. Consider accessing stats on market research platforms like Finviz, Morningstar and Yahoo Finance. Look for the following metrics:

  • Valuation. Get a sense of how much the company is worth in the eyes of the overall market.
  • Balance sheets. Browse quarterly or annual balance sheets for a broad overview of current assets, liabilities and shareholder equity.
  • Cashflow statements. Review operating, investing and financing cash flow to see how the company’s money moves.
  • Earnings per share (EPS). Find out how profitable a company is on a per-share basis.
  • Price-to-earnings ratio (P/E). Review how the company’s stock measures up to its earnings per share.
  • Price-to-book ratio (P/B). Compare the company’s market value with its book value — the net value of its assets.
  • Price-to-sales ratio (P/S). Review the company’s revenue multiple by putting its stock value and revenue head to head.
  • Analyst ratings. Explore analyst ratings to track whether the stock is under- or over-performing month over month.
  • Revenue. Get a detailed breakdown of revenue composition by business category and region.
  • Return on equity (ROE). Explore charted year-over-year ROE trends for an accurate look at how a company makes use of its resources.

2. Real-time heat lists

Get a big-picture overview of market performance with heat lists. These can help you gauge market performance across Canadian, US and international markets in real time. Data is shown in green and red to help you quickly zero in on the type of investment you’re seeking. Browse trade, search and news heat lists to identify stocks with forward momentum.

3. 24/7 financial news

The market waits for no one—and staying on top of industry-impacting news events is a vital part of value investing. Never miss a beat with market news that’s updated around the clock:

  • News headlines. Explore announcements from major news sources like MarketWatch, InvestorPlace, Dow Jones, Benzinga, Bloomberg and more. Major market and industry news has the potential to affect the value of a company’s stock and subsequently your portfolio.
  • Earnings calendar. Track upcoming earnings reports across companies you’re interested in. Earnings reports act as a temperature gauge, helping interested investors and shareholders alike assess the company’s financial health.
  • IPO calendar. Stay on top of companies slotted for public release. IPOs are a popular investment vehicle, and half the battle for an interested investor is knowing when and where an IPO will price.
  • Dividend/stock split calendar. Learn about which companies are expecting dividend payouts or stock splits. Stock splits affect the value of shares, and dividends are an important asset to track for income investors.

4. Stock comparison tools

Some research tools allow you to pit 2 or more stocks against each other to directly compare present and historical performance as well as various data points. See how multiple stocks stack up across numerous metrics, including:

  • Market cap
  • Volume
  • Revenue
  • Gross profit
  • Assets and liabilities
  • Dividend yield
  • Target price
  • EPS
  • P/E
  • P/B
  • P/S
  • ROE

5. Institutional holdings

If you’re looking for inspiration from the pros, learn from top institutions like Bridgewater Holdings, Soros Holdings, Renaissance Technologies, Capital Research and more by tapping into these companies’ holdings to see which investments may be worth watching.

Finder survey: Are men or women more likely to consider trading tools when choosing a stock trading platform?

ResponseMaleFemale
Trading tools and platforms34.82%27.02%
Source: Finder survey by Pollfish of 1001 Canadians, January 2024

Other useful tools for value investors

Educational courses

Consider taking educational courses to grow your knowledge of the following:

  • Stocks. Learn about stock basics, IPO investing, fundamental analysis, technical analysis and valuation analysis.
  • Options. Read about options trades, explore how options work and learn how to read an options table.
  • Funds. Dive into ETF basics and strategies, then further your knowledge with information on daily leverage certificates and real estate investment trusts (REITs).
  • Investing from different perspectives. Learn about crypto basics, economic indicators, the Federal Reserve and more.

Community discussion board

Loads of beginner and experienced investors alike use community discussion boards to swap ideas and hunt down promising investments. Connect with fellow traders on active discussion boards to discuss trades, trending topics, market news and strategies with like-minded investors from around the world.

Bottom line

If you’re frustrated by the limited research options offered by beginner investment apps, it may be time to explore a more sophisticated trading platform. The better-informed your trade, the less risk you invite into your investment portfolio. Sign up for a stock trading account today to access all the tools you need to conduct high-quality fundamental analysis.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.

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Managing editor

Jennifer Gimbel is senior managing editor at Policygenius and a former editor at Finder, specializing in personal finance. Jenn's expertise and analysis has been featured on MediaFeed and other outlets. She holds a BS in arts administration from Wagner College, with minors in economics and journalism. See full bio

Jennifer's expertise
Jennifer has written 3 Finder guides across topics including:
  • Personal finance literacy
  • Editor and writer mentorship
  • Fact-checking for accuracy
  • Editing content for biases
  • SEO and EAT best practices
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