Earnings are the driving force behind every stock market trend
Understanding stock market fundamentals is essential for active traders, financial advisers, and institutional fund managers. Business profits — reported as Earnings — determine the Fundamental Intrinsic Value of a company's share price. When you understand how Earnings, EPS and the P/E ratio work, you can anticipate market trends and protect your capital before the next crash.
Explore our fundamental guides below, from the history of company shares through to how UIS interprets EPS Estimates to predict S&P500 bear markets with 100% accuracy since 1997.
01Why Do We Buy Company Shares
Many small investors misunderstand what they are actually investing in. Shares are a stake in a business whose primary objective is to make money and deliver an acceptable Return On Investment. Learn the history of companies and why earnings are the driving force behind share prices.
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02The Real Value of Company Shares
A share is worth the Fundamental Intrinsic Value based on Earnings and your required Return On Investment. Learn how to calculate the FIV of a stock, what an acceptable ROI looks like, and why stocks crash back to their intrinsic value when speculative exuberance unwinds.
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03The Stock Market Evolution
From the Amsterdam Stock Exchange in 1602 to the London and New York exchanges, stock markets evolved to emphasise earnings and the P/E ratio. Discover how speculative markets like the Nikkei 225 mature, and why the S&P500 PE follows a regular cycle.
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04How Earnings Affect Share Prices
Business profits determine the value of a business. See how those profits flow into the two numbers every investor watches — Earnings Per Share (EPS) and the Price-to-Earnings (P/E) ratio — with worked examples and formula boxes.
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05EPS Estimates
Public companies report estimates of Earnings for the next four quarters. Learn how accurate EPS Estimates are, why they are predictive, how to interpret them, and the proprietary UIS method that uses 8 risk assessment criteria to predict S&P500 bear markets.
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Discover the Key Indicator That Drives Stock Market Performance
Whether you're new to investing or an experienced trader, understanding company earnings can help you make more informed investment decisions and avoid costly mistakes.
Sample UIS Risk Rating Report