Fundamental analysis in investment decisions in the stock market

Pavlo Mykhaylovych Likhnovskyi


Introduction. Determination of the fair value of any asset is creative and challenging task. Its solution requires the a clear understanding of various economic processes and phenomena from an analyst. Therefore, the implementation of correct and objective analysis requires a high level of professionalism, a clear understanding of the factors, that influence the evaluation result, knowledge of analysis techniques and approaches. The analysis of securities is necessary in order to take skilled managerial decisions as for financial investments. In terms of the domestic economy a determination of the fair value of the shares and the formulation of a conclusion as for their investment attractiveness are the difficult tasks. Practical problems are associated with the construction of long-term macroeconomic and sectoral forecasts; limitations of Ukrainian stock market; relatively small number of transactions, and small amount of available reliable financial information about the issuer and the agreements.  All these things complecate the work of the analyst. Classical methods for assessing the market value of the issuer and forecasting price fluctuations on its securities are based on two fundamentally different approaches - fundamental and technical. Issues of using of fundamental analysis for the evaluation of securities on the stock market is revealed in the writings of many scientists and economists. However, despite the significant elaboration of this theme, the issue of the use of fundamental analysis remains debatable. Therefore, the current study about the fundamental analysis use in terms of Ukrainian stock market as a tool for improving the efficiency of investment decisions is actual. That is, the development of an algorithm of fundamental  analysis from the position of return, risk and liquidity should be considered.

Purpose. To explore the theoretical principles of fundamental analysis; compare approaches to its implementation to develop an algorithm; analyze the investment attractiveness of securities and recommendations for investment decisions in the domestic stock market.

Method (methodology). The methods of induction and deduction, comparative analysis, the method of abstraction and formal logic to summarize the views of scientists on the concept of "fundamental analysis" and clarify its economic substance are used in the paper. The methods of synthesis and analysis, induction and deduction, comparison, grouping and graphical method for visual illustration are used to develop the algorithm for the conduction of  investment attractiveness analysis of securities on the basis of fundamental analysis.

Results. It has been clarified the interpretation of the essence of the concept of "fundamental analysis", which is seen as a process of research of the key factors that affect equity prices to determine the fair value of the asset, investment risk and expected return for rational management decisions. It was found that a key principle of fundamental analysis is based on the fact that the true value of the issuer's securities can be matched with its financial performance. It is established that the investment attractiveness analysis of securities which is based on the principles of fundamental analysis, should have a clear deductive direction of research, that is, from global assessments through macrolevel to consideration of securities of certain issuers at the macro level. It has been proposed an algorithm for the investment attractiveness analysis of securities for investment decisions in the stock market. 


evaluation; investment attractiveness; securities issuer; the fair value of share

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Science Works Journal "Ekonomichnyy analiz"

ISSN 1993-0259 (Print)  ISSN 2219-4649 (Online) DOI: 10.35774/econa

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