algorithmic trading / fundamental analysis / financial statements
What Are Fundamental Indicators? Understanding a Company's Financial Health
Course walkthrough
Algorithmic Trading Fundamentals
All lessons in this series
- 1What is Algorithmic Trading? A Beginner's Guide to Automated Strategies
- 2What is a Trading Indicator? The Building Blocks of Algorithmic Trading
- 3Technical Analysis Indicators Explained: Mean Reversion vs Momentum
- 4What Are Fundamental Indicators? Understanding a Company's Financial Health
- 5Alternative Data Sources for Trading: Satellite Imagery, Sentiment Analysis & More
- 6From Indicators to Conditions: Building Your Trading Rules
- 7What is a Trading Condition? Turning Indicators into True/False Logic
- 8What Are Trading Actions? The Final Building Block of Algo Trading
- 9What is a Trading Strategy? Indicators + Conditions + Actions
- 10How to Know if Your Trading Strategy is Actually Good?
- 11What is Backtesting? How to Test Your Trading Strategy
- 12What is Trading Strategy Optimization? (And How to Avoid Overfitting)
- 13Recap: From Building Blocks to Deployment
- 14How to Deploy a Trading Strategy: Paper Trading to Live Trading
- 15How to Backtest a Trading Strategy on NexusTrade (Beginner Guide)
Technical indicators are useful, but they can't tell you the whole story. A stock represents a business - and if you want to predict where it's headed long-term, you need to understand the company's financial health. That's where fundamental indicators come in. In this video, I cover: → What fundamental indicators actually measure → Key metrics: revenue, net income, free cash flow, PE ratio → What makes a stock "fundamentally strong" → Why these indicators matter for long-term predictions Fundamentally strong stocks bring in money, grow year over year, aren't overvalued, and don't carry crushing debt. This video teaches you how to spot them.
Watch lessons, complete hands-on activities, pass quizzes—and by the end, you'll have a real strategy deployed to the market.
Transcript
0:00Technical indicators are really useful, but there is low evidence to suggest that they alone can help you predict how stocks are actually going to move.
0:10If you wanna know what stocks are truly good and what stocks are truly bad, you have to understand what a stock actually represents. A stock represents a business, and you have to understand the underlying financial health of the business if you wanna predict where that stock will be in the long term.
0:35To do this, we use a different type of indicator called fundamental indicators. Fundamental indicators are ways to evaluate a company's financial health.
0:48They help us understand: is this company actually healthy? Is it likely to make money next year? Is it likely to increase in its profits or its cash flow over the next few years?
1:02And why do we think that?
1:05It uses metrics like revenue, net income, free cash flow, and other financial statements that come through a company's earnings reports.
1:17But it's not just these raw numbers from the earnings report. It also includes some calculations.
1:26For example, a very common fundamental indicator is the PE ratio, or the price-to-earnings ratio, and it basically tells you how expensive a stock is compared to what that stock is actually worth in terms of its net income.
1:46Other fundamental indicators can include things like a stock's free cash flow, how much cash is actually being generated by the underlying business, or it might be something as simple as revenue, how much money is being brought in.
2:03In total, these indicators are extremely important because they allow us to understand why a company is moving in a certain direction over the long term.
2:18Fundamentally strong stocks are stocks that have good financial metrics. What does that mean?
2:25That means they bring in a lot of money, and they make more money this year than they did last year.
2:35It means that the stock is not too expensive. They're not worth a lot more compared to the amount of money they're bringing in.
2:44It means that they don't have a lot of pressure, a lot of debt, a lot of obligations that might make them lose money in the long term. And it basically tells us how healthy a business is.
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