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2024 Fundamental Analysis: 

Demystify Financial Information: Unlock the Secrets of Understanding and Utilizing Key Financial Data for Smarter Investing!
GPSM  |  Will Bell  |  April 10th, 2023
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If you're thinking about getting into the stock market it's a good idea to research a company's performance before investing in its stock.


Hey guys it's Will, stocks and their prices are reflections of the company's health. 

While stock prices do not always directly correlate with a company's fundamentals such as the cash needed for day-to-day operations, this is what we're going to cover...


... I found in over 20 years of trading that small-cap companies which have cash for their day-to-day operations have a higher ratio to instilling investors' trust which leads to more traders buying into the security. 

Traders who trade penny stocks focus strongly on Tech Analysis and the Buy, no-Buy decision is weighted on what the charts do say. 

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If you're going to win 9 out of 11 trades you need to buy stocks in companies that are doing well.


You don't want to buy stocks in companies that appear to be heading in the wrong direction. 

Fundamental Analysis is one way to determine a company's health.

What Is Fundamental Analysis


It is the process by which traders research the health of a company's business and place trades based on their findings.


Cash for day-to-day operations is one of the core Fundamentals that must be considered.

I trade penny stocks, and I trade big caps, but for traders who trade only small caps, Fundamental Analysis isn't nearly as important as Technical Analysis.


Penny stock traders must become familiar with price action and pattern recognition on stock charts.

For all online investors understanding the Fundamentals of a stock that you're considering buying, however, can be beneficial to you, and it will help you navigate through a securities' data. 

Once you successfully know how to navigate the markets your trading education accounts for your brokerage account cash increase.


This is due to the fact that in the online markets in order to win you will learn to think for yourself.

A great way to expand your knowledge base is to stream MR. MARKET for free with your subscription to our trading newsletter Next Big- Cap Alerts. 

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Next Big-Cap Alerts Trading Newsletter focuses on alerting a watch list of stocks over $5.00 a share that have catalysts forecasting possible bullish price action.  

Go Here to see how well subscribers are doing! 

(*My results, as well as the results of subscribers, are not typical.)


It is possible to have different results from person to person. The vast majority of traders lose money.


A long period of work and dedication has accrued in the form of these traders and myself. Trading is a high-risk endeavor by its very nature.


Make sure you do your homework before trading and never trade with money that you can not afford to lose.

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What Is The Difference Between Revenue and Gross Profit?

It's easy to get confused over the issue of revenues and gross profits. They may sound like the same thing, but they are in fact completely different.

When a company receives money from paying customers or clients, it is referred to as revenue.


Acme Smart Widgets generates $100 million in revenue if it sells 50,000 A-1 Smart Widgets at $2,000 each in a fiscal year.


Although revenues can provide a comprehensive picture of a company's profitability, it does not take into consideration any other factors.

When it comes to gross profit (accounting), revenue minus cost of goods sold = gross profit.


If the same company spends $100 to manufacture each A-1 Acme Smart Widget, the company's gross profit is $95 million dollars.


You deduct $100 from the price of each $2,000 Acme Smart Widget. The gross profit margin of a company is an excellent indicator of whether or not the company has a healthy profit margin.


In other words, does it provide a significant amount of value for every dollar invested? Let us return to our A-1 Acme Smart Widget as an example.


Imagine that another company sells its B-1 Acme Smart Widget for the same price as yours, but it spends $500 on each B-1 Acme Smart Widget to manufacture it.


Given the same sales, that company's gross profit is only $75,000,000 million — a difference of $25 million in terms of profit margin.

What is the relationship between gross profit and the stock market?


Consider the case of Twitter Inc. ($TWTR$; NASDAQ). In the quarter ended December 31, 2021, the company reported gross revenues of $1.57 B, representing a 21.58 percent increase over the same period last year.

There were a number of factors at play in this situation in 2020. 


Today, in light of all the known dysfunction of Twitter's executive management and the costs of having teams of in-house software engineers, this is a remarkable achievement.

Maintaining a blazing Social Media company is a costly endeavor. Particularly when its competition who competes for market share, brands itself as the next Twitter.


Analysts predicted that the company would have a significantly lower gross profit based on its expenses.


As soon as Twitter announced Elon Musk's was attempting to buy the company in April 2022, the stock price went through the roof and the NYSE halted trading all trading of stock. The price action moved north at 5.5% bullish. 


What Are Direct Costs and How Do They Affect You?

A direct cost is a predictable, specific cost that is associated with the production of a specific product.


It is also known as an indirect cost.


The wood used to make smart tables is a direct cost if you are manufacturing and selling smart kitchen tables, for example, because it is a raw material.


Both specific and necessary for the production of smart kitchen tables, this is a requirement.

Materials are only one type of direct cost. There are others as well.

Consider the following scenario: you manufacture a single product — we'll use Coffee Makers as an example — and you have a manufacturing plant.


Every cost associated with that plant, from the rental of the space to the payment of the employees' salaries to direct costs, can be traced back to it.


They're all linked together by the production of a single coffee maker.

What Are Indirect Costs and How Do They Affect You?

Costs incurred indirectly are a little more difficult to quantify.


Typically, they cannot be linked to a specific piece of equipment.

Retrace our steps back to our Coffee Manufacturing facility. In addition to coffee makers, we're expanding our product line with another upgraded smart model.


It will be manufactured in the same facility, with the same employees overseeing each step.


No longer can any of those expenses — such as rent or salaries, for example — be classified as direct costs.

Indirect costs can include items such as administrative expenses, depreciation and amortization of equipment, and other similar items.

The term "depreciation" refers to the decrease in the market value of a piece of machinery or equipment.


The value of a Garbage Truck Company decreases over time as a result of your use of the Garbage Trucks services to make profits for the company.


That is the cost of doing business. 


Amortization is the accounting practice of spreading out the cost of a piece of equipment over the course of the equipment's operational life. 


If you have a mortgage... your broker explained your mortgage amortization.  


Instead of stating that a Lamborghini Gallardo costs $110,000 on the day, it is purchased, you could state that it costs $11,000 for every year it is in operation over its 10.5-year lifespan.


What Exactly Is Operating Income, And Why Should You Care About It?


If you're thinking about investing in the stock market, you might be interested in how a particular company is performing.

A stock's value is a reflection of the company that owns it.


While stock prices do not always correspond directly to Fundamentals such as operating income — as is the case with penny stock companies in particular — they do so in the cases of big-cap securities. 

Companies that are in good health inspire confidence.


Most traders are looking to buy stocks in companies that are doing well, and they are looking to sell stocks in companies that appear to be heading bearish.


The operating income of a company can be used to determine the health of the company.


  • So, what exactly is operating profit?

  • What is the relationship between operating income and net income?

  • What is the formula for calculating operating income?

I'll tell you, and show you how this affects your stock trading strategy. 

TWTR Profile ($)

Sector: Technology Services

Industry: Internet Software/Services

Employees: 7500

Twitter, Inc is a global platform for public self-expression and conversation in real time. It provides a network that connects users to people, information, ideas, opinions and news. The company's services include live commentary, live connections and live conversations. Its application provides social networking services and micro-blogging services through mobile devices and the Internet. The company can also be used as a marketing tool for businesses. Its products and services include Promoted Tweets, Promoted Accounts and Promoted Trends. Twitter was founded by Jack Dorsey, Christopher Isaac Stone, Noah E. Glass, Jeremy LaTrasse and Evan Williams on March 21, 2006 and is headquartered in San Francisco, CA.

What Is the Definition of Operating Income?


Operating income is the profit made by a company after taking away its operating expenses and cost of goods sold.


Mortage, employees, gas cost yearly, depreciation, and amortization of all assets are all examples of operating expenses...

Consider the operations of a traditional pizza establishment.


A pizza establishment requires stoves, shelves, freezers, sales delivery drivers, soda machines, and ingredients.


It is necessary to market the products. After deducting all of the expenses, you are left with the operating income.

Non-operating expenses are not included in operating expenses.


For example, if a company owes money to lender, the interest it pays to the lender is not deducted from the company's operating income.

We'll also look at how revenue and operating income affect the value of a company's stock.


Large corporations are particularly susceptible to this problem.


Operating Income as a Percentage of Revenue

Revenue is defined as all of the money earned by a company from the sale of its products or services.


Consider the following scenario: you own a computer server business with ten clients who each pay you $7,000 per month.


Your annual revenue is $840,000.

For example, suppose you own an Organic Dog Food Company.


You sell 1 pallet of Organic Dog Food for $200 each.


That means you've earned $200 in revenue. No matter how much money you spend, you still have a $200 profit to show for it.

The top line is referred to as such because it is the most significant line on the income statement.


When a company experiences top-line growth, it means that its revenue is increasing.

In general, an increase in revenue is beneficial to a company's stock price. Assuming that the company's cost of goods sold is not excessive.

Operating Income As a Percentage Of Net Income

In layman's terms, net income is the amount of money left over after expenses are deducted from revenue.


Due to the fact that a company can report income after operating expenses while still being in the red after debt payments, this is an important figure.

Net income is referred to as the "bottom line" in some circles because it is the last line on the income statement to be calculated.


In addition, it is the smallest amount of income after all expenses have been deducted from it.


Operating Income as a Percentage of Profit

Profit and operating income are both measures of how much cash a company has made, but they are calculated using different deductions from that income.

Profit is calculated by taking the cost of goods sold from the total amount of revenue received.


The cost of goods sold typically includes the price of the merchandise, advertising and marketing expenses, materials, labor, and other costs associated with the production of the goods sold.

Example: If the company Efficiency sold $70 worth of its efficient goods and it cost $30 to manufacture the goods, the company would make a $40 profit on the sale.

Operating Income vs Earings Before Intrest and Taxes is a measure of how profitable a company is (earnings before interest, taxes, depreciation, and amortization)

A company's earnings before interest and taxes is the amount of cash it makes before interest, taxes, depreciation, and amortization.


It is used as a substitute for net income in certain situations.


However, because it does not include the costs of capital investments, earnings before interest and taxes can be misleading in some situations.

Even though companies aren't required to disclose earnings before interest and taxes, it's a good idea to understand how to calculate it.

The following is the formula for calculating the earnings before interest and taxes:

Earnings before interest and taxes are calculated as net income + interest, taxes, depreciation, and amortization.

Operating income is distinct from other types of income because it calculates profit after all operating expenses have been deducted.

What is the significance of operating income in a company's operations?

A company's proficiency and efficiency are measured indirectly through its operating income.

Most penny stock companies don't have cash for day-to-day operations. 


This measurement is used by investors and business owners to determine how much revenue will be converted into profit in the future.

Investors and business owners want to see a high level of operating profit.


The more the operating income, the more profitable the company is considered to be by future and current investors. 

Think about what the executive operations manager could do with $2,800,000 a month for its day-to-day operations vs $3,000 a month. 

Operating income is used by a company's operation managers to make day-to-day decisions that have the potential to affect the company.


As a result, operating income is a clear window to see the management's abilities.

How Important Is Operating Income For The Active Trader?

Operating income as I stated earlier does not have the same impact on penny stocks... period. 


Large-cap securities go bullish or bearish based on the securities' operating income.


Traders should be familiar with how to use it.

Formula For Calculating Operating Income

Before you begin incorporating operating income into your trading strategy with your Next Big-Cap Alerts membership, you should become familiar with the formulas that are used to calculate it. 

The following are the 3 formulas that you can employ:


  • Operating income is calculated as net earnings plus interest expense plus taxes.

  • Operating income is calculated as follows: total revenue minus direct costs minus indirect costs.

  • Operating income is calculated as follows: gross profits minus operating expenses minus depreciation and amortization.


It is smart trading to be familiar with all 3 methods of generating operating income. Knowing how to read financial statements can be made easier if you are familiar with the formulas.


Then you can see how the Fundamentals of a company affect the price of its stock.


How to Calculate a Company's Operating Profitability

A company's operating income is one of the first steps in determining the financial health of a company, and it is one of the most important.


If a company generates a significant amount of operating income, it is almost certainly doing well. Check the income statement of the company to find out how much money the company made from operations.


Operating expenses are listed below gross profits and are deducted from gross profits in the calculation of gross profits.


Operating income is the amount left over after operating expenses are deducted from gross profits.

The Formula for Calculating Operating Income

So, what is the formula for calculating operating income? You subtract operating expenses from total revenue to arrive at net revenue.


Equipment depreciation, for example, is considered an operating expense because it occurs on a recurring basis and is part of the company's day-to-day operations.

Why would you be interested in learning about a company's operating income?

For starters, it can provide insight into the profitability of a company.


If a company's operating income begins to decline, profit loss may become a source of concern.

It is possible to calculate a company's operating margin by using operating income, which could be the standard of the amount of profit earned for every $10 of sales generated.


This could be calculated up or down the dollar. 


In business, the operating margin can be either positive or negative as well; for example, if operating expenses outweigh profit, the company has a negative operating margin.

Gross Income Is The Sum Of All Of A Company's Earnings.

Gross income is the amount of money earned after deducting the cost of the goods sold.


Even in cases where a company's gross income appears to be promising, you must usually take into account other expenses associated with running a business.

Obtaining a complete picture of a company's income is difficult without taking into account operating expenses.


Given that gross income only takes into account the costs of goods sold, it is not a particularly reliable indicator of a company's financial health.

Expenses incurred in the course of doing business

The costs associated with running a business are referred to as operating expenses.


The costs of the goods sold are not included in the calculation of operating expenses. In other words, guys, what are operating expenses?


Supplies, rent on office or retail space, payroll, and marketing costs are all examples of expenses.

Due to the fact that these expenses can vary greatly, they can have a significant impact on a company's overall profits.


Operational Income (accounting adjusted)

The term "adjusted operating income" does not refer to a commonly accepted accounting principle.


Companies, on the other hand, may have one-time streams of income — such as income from a stock offering — or one-time expenditures incurred.

As a result, the operating income of the company may need to be "adjusted" in order to fully disclose the income, without affecting the overall financial situation.

Due to the fact that these are one-time expenses that do not occur on a yearly basis, treating them the same as other expenses would distort the company's financial results for the reporting period.

After-Tax Operating Income is defined as net income after taxes.

Because after-tax operating income is a non-Generally Accepted Accounting Principles item, the amount of after-tax operating income that a company includes in its calculation can vary.

Although after-tax operating income is not as widely used as pre-tax operating income, it can be a useful indicator of the amount of cash a company has available to pay a debt or cover other expenses.

What Is The Relationship Between Operating Income And Stock Prices?

Operating income is a Fundamental Indicator of a company's health.


Therefore, when deciding whether to purchase shares in a particular company, it is important to consider this factor.

A company's operating income can be increased by increasing revenue, decreasing operating costs, or a combination of the two.


However, it does not necessarily result in greater profits.

As a result, online stock traders must consider the big picture when making decisions.

Operating income does not include expenses that are not directly related to the operations.


If a phone company is sued because one of its telephone cables harms homeowners in its development, the company's balance sheet may still show that it is profitable...

However, its reputation can suffer a significant blow, and its stock price can plummet.


The Distinction Between Operating Income And Non-Operating Income Is Important.

On a financial statement, accounts distinguish operating income from non-operating income (also known as net income).


Non-operating income is income that is unrelated to the day-to-day operations of a company.

It is dependent on the debts, assets, and method of operation of a business to determine the specific non-operating costs incurred by that business.


There are many different types of liabilities that can be incurred, including debt obligations, forex exchange, investments, and selling assets.

Due to the fact that both gains and losses are accounted for, the term 'income' is misleading. 


A company's investment, for example, may experience a decrease in value while still generating revenue in the non-operating income column as Radio Shack did before it went under and came back. 

Matching Market Capitalization To Operating Income.

Now we'll come full circle and talk about the stock market once more guys. Let's take a look at the total market capitalization.


A share of a company's stock is worth X on the open market.


Isn't it straightforward? Everything has a monetary value in the market.


If you want to sell your used TV to someone in your neighborhood, that person will almost certainly check the market value of TVs before agreeing to a meeting transaction.


In the event that you are trying to sell a technologically advanced chair valued at $10,000 for $5,000, the prospective buyer will wonder what exactly is wrong with the chair.

This Is Why Securities Analysis Is Important.


By knowing the market capitalization of a company's security, you can make better trading choices, whether you are bullish or bearish on the stock.

To determine a company's market cap, multiply the current share price by the number of shares currently in circulation.


If a company's stock is trading at $6 per share and there are one million shares outstanding, the company has a market capitalization of $6 million dollars.

We all know that a company's stock price does not always tell the whole story about the company.


The greater the market capitalization of a company, however, the more secure and stable the company is likely to be.

Stocks are classified according to their market cap.

A mid-cap company, for example, is in the midst of a growth phase.


If the current trend continues, you may see both short-term and long-term gains in your investments.


IBM and Amazon are examples of large-cap companies. It is because they are extremely stable that they can be considered as better long-term investment candidates.

Investing in small and microcap companies, exposed you to significantly greater volatility and risk, but also the reward is equal, you must educate yourself.


Small and micro-cap companies such as penny stocks are classified as micro-caps.


Their market capitalizations are typically in the $300 million to $500 million range.

What Opportunities Do Traders Have to Profit or Loss from Operating Profit or Loss?

The ability to profit from price movement is essential in the stock market.


Investors and traders lose money when the price of a security does not fluctuate in any direction. There won't be a lot of activity in the market.

When a stock breaks through a level of resistance or support, things start to get interesting.


High volatility has the potential to generate profits, whether you're betting on the next big-cap stock or like Bill Ackman short selling a stock like Herbal Life you believe will fall in value over time.

Large swings in operating income frequently occur before significant changes in the stock market. You must, however, be prepared in advance.

Next Big-Cap Alerts keeps subscribers informed of any significant changes in the market's price action on any of our members-only stock watchlists.


If you haven't yet you can grab your membership to Next Big-Cap Alerts.


We proved you with the Entry Price targets and Exit Price targets on stocks priced over $5.00 a share that have a chance to become the next Wall Street Bull. 


Don't trade alone...


...we publish Best Trading Practices for each stock over $5.00 a share that has been identified as a potential Wall Street Bull. 


Our charting details on each alerted stock help you find the best stocks that fit your trading style.


Our additional feature is called Trade Strategies. This gives you a strategy to consider if you take the trade based on current market conditions (of course you can trade how you want but this gives you a step-up)

You can get your stock alerts via Email or SMS. 


This will provide you with speed before the market opens and help you avoid missing any price-altering news catalysts.

If you're uncertain still after becoming a member take 30 days to and paper trade with us and if you're still not sure I'll refund the cost of your subscription.

(Quick disclaimer: I am proud to have contributed mainly to the design and development of the Next Big-Cap Alerts Trading Newsletter but at this point that's no secret.)

First And Foremost Before You Take A Trade, Understand 3 Questions From You... To You.

  1. What are you willing to risk

  2. What is your stop-loss price

  3. How will you manage your trade


These are all important questions to ask yourself. What do you consider to be your trading style?

When it comes to Trading Securities, following your rules is essential to beating market forces.

Pay attention to the stock's operating income to determine when it will break out of its trading range.

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