I have to mention Warren Buffett, (see Forbes ranking if you don't know him) one of the richest man in the World when we performing Fundamental Analysis. He able to use this method to accumulate unlimited of wealth by investing stock that keep create value and thus money.

How to select a stock to invest?
We can select which share to purchase by evaluation of a company intrinsic value. Just go Popular book store and get the financial report summary. There are some indicator already calculated for you in the company asset and balance sheet just like below:

PE Ratio = (Market Price)/(Earnings per Share)
PE ratio tell you how many years it takes to recover your investment and also reflect the future earning. The lower, the better. PE ratio is 5 means 5 years to recover, which is quite good in some sector.

Price to Book Value (PBV)= Stock Price ÷ Book Value per Share
Book value is the net asset value for the company. If the PBV is 2, means the share price is 2 times higher than the real value. The price is underprice when the PBV is below 1.

Dividend Yield=Annual Dividend per Share / Price per Share
It measure the “productivity” of an investment because normally only well-run company pay out dividends. Dividend yield=10% is just like your money in the bank create 10% p.a of interest. The higher, the better(sometimes not), actually it does not means the profitability of one company.

ROE = Net Profit ÷ Shareholders’ Equity × 100%
The most important factors in making successful stock investment to measure profitability of one company. It shows the return of reinvesting its earnings and fully utilize our capital to generate more profits. So, the higher, the better, good enough if you can found 15%.

Conclusion, you can use those indicator of even combine them and make your own indicator. It depends on your investment purpose. Investing to value is something like rolling a snowball, this is how Warren Buffett become god of stock to certain investor. They said a compound interest rate of small amount of money can let you buy a New York city now if you start invest 50 years ago. It is true if you able to filter out a high return rate.

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