If technical analysis looks at the chart, fundamental analysis looks at the business itself. Its task is to determine the fair value of a company and compare it with the market price. If a stock is worth less than it should be, it's a reason to buy; if it's worth more, it's best to hold back.

Three Levels of Analysis

  • Macroeconomics: central bank rates, inflation, exchange rates, GDP growth. These set the overall backdrop for all companies.
  • Industry: is the sector growing, how much competition exists, are there regulatory risks.
  • Company: financial statements, debt, management, dividend policy.

What to Look for in Financial Statements

Three main documents: income statement, balance sheet, and cash flow statement.

  • Revenue — how much the company sold. Dynamics are important: is it growing year-over-year.
  • Net profit — what remains after all expenses and taxes.
  • Debt — compare it with equity. A ratio above 1–1.5 requires caution.
  • Free cash flow — the real money the business generates. Paper profits can exist while there's no actual cash.

Key Multiples

Multiples allow you to compare companies of different sizes with each other.

  • P/E — price to earnings. Shows how many years of earnings will recoup the purchase. A low P/E with a growing business is a good sign.
  • P/B — price to book value. Below 1 means the market values the company cheaper than its assets.
  • ROE — return on equity. The higher it is, the more efficiently the business uses shareholder capital.
  • Dividend yield — annual dividend to stock price. Often a key metric for local markets.

Calculation Example

A company earned 50 billion som in net profit with 100 million shares issued. Earnings per share is 500 som. If the stock trades at 4,000 som, the P/E is 8. If competitors in the same industry have a P/E around 12, the company appears undervalued—provided the reason for the low price isn't hidden problems.

Local Market Features

Many Tashkent stocks belong to companies with government participation, and their dividend policy depends on shareholder decisions. Financial statements are published on the exchange website and in the Unified Corporate Information Portal. Check if the statements are audited and by which standards—national or international.

Method Limitations

Fundamental analysis doesn't tell you when the price will reach fair value. An undervalued stock can remain so for years. That's why this approach works better for investors and position traders than for day traders.

Conclusion: learn to read three statements and four multiples—and you'll already understand the company better than most market participants.