example of stock fundamental analysis

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14 November 2024

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Analysis of stock fundamentals is a crucial component for investors in making investment decisions in the capital market. According to data from the Indonesia Stock Exchange (IDX), until early 2024, the number of stock investors in Indonesia has penetrated the figure of 10 million investors. However, there are still many who do not understand how to analyze stocks fundamentally. This article will discuss fundamental stock analysis and the following is an example of stock fundamental analysis.

What is stock fundamental analysis?

Fundamental analysis is a method of evaluating the intrinsic value of stocks by studying factors related to the condition of the company, industry, and macro economy. different from Analysis#ATFP_CLOSE_TRANSLATE_SPAN# TECHNICAL Focusing on historical price movements, fundamental analysis emphasizes aspects of financial health and the company’s business prospects.

Main Components of Stock Fundamental Analysis

1. Financial Statement Analysis

Financial reports are the main foundation in conducting fundamental analysis. Some important components to note:

Balance Sheet
income statement (income statement)
cash flow statement
Statement of Changes in Equity

2. Important Financial Ratios

The following are the financial ratios that investors must understand:

a. Profitability Ratio

Return on Equity (ROE)
Return on Assets (ROA)
Net Profit Margin (NPM)
Gross Profit Margin (GPM)

b. Liquidity Ratio

Current Ratio
Quick Ratio
Cash Ratio

c. Solvency Ratio

Debt to Equity Ratio (DER)
Debt to Asset Ratio (DAR)

d. Valuation Ratio

Price to Earnings Ratio (PER)
Price to Book Value (PBV)
Price to Sales Ratio (p/s)
Enterprise Value to EBITDA (EV/EBITDA)

example of blue chip stock fundamental analysis

To provide a concrete picture, let’s analyze one of the blue chip stocks in Indonesia:

Studi Kasus: Contohh Analisis Fundamental Saham PT Bank Rakyat Indonesia Tbk (BBRI)

Let’s do an in-depth fundamental analysis of one of the largest banks in Indonesia.

1. Macroeconomic analysis that affects BBRI

Economic conditions 2023-2024:

GDP Growth: 5.05% (2023)
Inflation: 3.35% (Dec 2023)
BI rate: 6%
Exchange Rate: IDR 15,500/USD

Impact on BBRI:

The increase in GDP drives credit growth
Controlled inflation supports credit quality
stable bi rate helps flower margin
The minimum depreciation of the rupiah is due to the focus of domestic business

2. Analysis of the banking industry

BBRI Position in Industry:

MSME Loan Market Share: 45%
TPF Market Share: 15.2%
Asset Rating: #1 in Indonesia

Competitive advantage:

Widest Micro Banking Network
The largest MSME customer base
Strong Digital Banking (BRIMO)
High brand awareness

3. In-depth financial statement analysis

a. BALANCE (in trillion rupiah)

Component	2022	2023	Growth
Total assets	1,865.3	2.054.8	10.2%
Credit	1.137.2	1,298.5	14.2%
DPK	1,328.4	1,459.2	9.8%
Equity	245.6	278.9	13.6%

b. income statement

Component	2022	2023	Growth
Interest income	120.8	138.9	15%
Operational profit	58.2	67.4	15.8%
Net Profit	39.1	45.3	15.9%

c. Financial ratio analysis

1. Profitability Ratio

ROE: 19.8% (2023) vs 18.6% (2022)
ROA: 3.5% (2023) vs 3.3% (2022)
NIM: 7.2% (2023) vs 7.0% (2022)

2. Asset Quality Ratio

Gross NPL: 2.85% (2023) vs 2.95% (2022)
NPL Net: 0.75% (2023) vs 0.85% (2022)
Coverage Ratio: 285% (2023)

3. Efficiency Ratio

BOPO: 68.5% (2023) vs 69.2% (2022)
CIR: 42.3% (2023) vs 43.1% (2022)

4. Capital Ratio

CAR: 25.8% (2023) vs 24.5% (2022)
Tier 1 Ratio: 23.2% (2023)

4. BBRI Stock Valuation

a. method of price to earnings ratio (PER)

PER BBRI: 15.2x
Per industry: 16.8x
Conclusion: Slightly undervalued

b. Price to Book Value (PBV) method

PBV BBRI: 2.8x
PBV Industry: 2.5x
Conclusion: Slightly overvalued but justified due to superior ROE

c. Dividend Discount Model (DDM) method

Intrinsic value = D1 / (K - G)

where:

D1 = expected dividend

K = required return

G = Growth Rate

Calculation:

D1 = IDR 168 per share
K = 12.5% (Rf + Beta × RM)
G = 8.5% (Sustainable Growth Rate)
Intrinsic value = IDR 4,200

5. BBRI SWOT Analysis

Strengths:

Dominance in the MSME segment
The widest service network
Strong Digital Banking
Low cost of funds

Weaknesses:

Dependence on the domestic market
High Exposure to the MSME Sector
Cost to Income Ratio is still high

Opportunities:

Potential penetration of digital banking
regional expansion
Cross-selling products
Financial Inclusion

Threats:

Competition from fintech
Strict regulations
Macro Credit Risk
technology disruption

Practical Implementation of Fundamental Analysis

1. 5M Analysis Framework

MONEY (FINANCE)

Income trend analysis
capital structure
Operational Efficiency
asset quality

Management (Management)

Director’s Track Record
Business strategy
Corporate Governance
transparency

METHOD (BUSINESS METHOD)

Business Model
Competitive Advantage
Operational Excellence
Innovation

Machine (Infrastructure)

Technology
distribution network
Production capacity
system efficiency

MARKET (MARKET)

Market Share
Brand Positioning
customer base
Growth Potential

2. Screening of Fundamental Criteria

Quantitative criteria:

Roe > 15%
der < 1
current ratio > 1.5
per < Industry Average
net profit margin > 10%

Qualitative criteria:

Good Corporate Governance
Competitive Advantage
Market Leadership
Strong Management
Growth Sustainability

conclusions and recommendations

Based on in-depth fundamental analysis of BBRI, it can be concluded:

Business Fundamentals: very strong with dominance in the MSME segment
Financial Performance: consistent with sustainable growth
Valuation: Fairly valued with potential upside
RISK: well managed through prudent risk management
Prospects: positively supported by digitalization and business expansion

Rekomendasi Investasi:

Accumulate at a price of IDR 4,000-4,200
Hold for the medium-long term
Target Price 12 Months: IDR 4,800

Tips for implementing fundamental analysis

Always update the latest data
compare with peer group
Pay attention to macroeconomic trends
Evaluation of Qualitative Aspects
Apply the Margin of Safety

Steps to carry out fundamental analysis

1. Macroeconomic Analysis

Factors to consider:

GDP growth
inflation rate
benchmark interest rate
Currency Exchange Rate
Fiscal and monetary policy

2. Industry Analysis

Aspects that need to be studied:

industrial competition structure
Government Regulation
sector growth trend
Industrial business cycle
Entry Barrier

3. Company Micro Analysis

Important elements:

Business Model
Competitive advantage
Quality Management
Corporate Governance
expansion plan

Practical Tips for Fundamental Analysis

1. Use trusted data sources

Audited Financial Statements
Company Prospectus
Securities research
IDX and OJK data
Bloomberg or Reuters

2. Pay attention to red flags

Some warning signs to watch out for:

The debt that continues to swell
Negative Operational Cash Flow
Frequent auditor changes
Suspicious transactions with related parties
Significant changes in accounting policies

3. Portfolio diversification

Risk Management through:

allocation of funds in various sectors
Combination of stock growth and value
Periodical adjustment of portfolio weights
hedging when needed

Common Errors in Fundamental Analysis

Too focused on one financial ratio
Ignoring qualitative factors
does not consider market timing
fixated on historical performance
Ignore the valuation aspect

software and analysis tools

1. Paid tools

Bloomberg Terminal ($24,000/year or around IDR 372 million)
REUTERS EIKON ($20,000/year or around IDR 310 million)
FactSet ($12,000/year or around IDR 186 million)

2. Free/Freemium tools

RTI Business
IPOT
stockbit
Wonderful

Fundamental Analysis Implementation Strategy

1. Top-down approach

Starting from macroeconomic analysis
continued with sector analysis
ends with company analysis

2. Bottom-up approach

Focus on the company’s individual performance
Looking for interesting valuations
consider macro factors as a complement

Cover

Stock fundamental analysis is an essential skill for long-term investors. Although it takes time and patience, an in-depth understanding of fundamental analysis will help investors make better and measurable investment decisions.

It is important to remember that fundamental analysis is not an absolute guarantee of investment success. External factors such as market sentiment, geopolitics, and Black Swan Events can still significantly affect stock price movements.

For optimal results, combine fundamental analysis with technical analysis, good risk management, and discipline in carrying out the investment strategy that has been designed.