Basic Fundamental Knowledge
Understand the key financial metrics and concepts every DSE investor should know before picking a stock.
What is fundamental analysis?
Fundamental analysis means evaluating a company's financial health and business quality to decide if its stock is worth buying at the current price. Instead of looking at price charts (technical analysis), you look at the company's earnings, debt, dividends, and growth — the actual business underneath the stock price.
Earnings Per Share (EPS)
EPS = Net Profit ÷ Total Shares Outstanding. It tells you how much profit the company earns for each share. A company with EPS of ৳10 earned ৳10 per share last year. Higher is generally better. More importantly, look for EPS that grows consistently year after year — a company growing EPS from ৳5 to ৳8 to ৳12 over 3 years is a positive sign.
Price-to-Earnings Ratio (P/E)
P/E = Current Share Price ÷ EPS. If a stock trades at ৳100 and EPS is ৳10, P/E is 10x. This means you are paying ৳10 for every ৳1 of earnings. A lower P/E suggests the stock may be undervalued; a very high P/E may mean it is overpriced or that investors expect strong future growth. Compare P/E against the company's own historical average and against sector peers — not against the entire market.
Net Asset Value (NAV)
NAV = Total Shareholders' Equity ÷ Total Shares. It represents the book value of each share based on the company's assets minus its liabilities. If a stock trades below its NAV, it may be undervalued. If it trades at 5x NAV, the market is pricing in significant future earnings. NAV is especially important for evaluating banks and financial companies.
Dividend yield
Dividend Yield = Annual Dividend Per Share ÷ Current Share Price × 100. If a stock pays ৳5 dividend and trades at ৳100, the yield is 5%. DSE-listed companies declare dividends either in cash or as bonus shares (stock dividend). A consistently paying company with a 4–8% yield is often a sign of financial stability.
Debt and financial health
- Debt-to-Equity ratio: Total Debt ÷ Total Equity. A ratio above 2x means the company is heavily leveraged and vulnerable to interest rate changes
- Current ratio: Current Assets ÷ Current Liabilities. Above 1.5 is generally healthy — the company can pay its short-term obligations
- Operating cash flow: A company reporting profits but consistently negative operating cash flow is a warning sign
Return on Equity (ROE)
ROE = Net Profit ÷ Shareholders' Equity × 100. It measures how efficiently a company uses shareholders' money to generate profit. An ROE consistently above 15% is considered good for most sectors. Banks and financial companies typically operate with higher ROE due to leverage.
How to read a company's financials on DSE
- Go to the DSE website (dsebd.org) → 'Company' tab → search by trading code
- Financial statements (Income Statement, Balance Sheet, Cash Flow) are published quarterly
- Annual reports are published after the fiscal year ends (most DSE companies follow July–June fiscal year)
- Look for at least 3–5 years of data to spot trends, not just last year's numbers
What TopStockBD does for you
Our DSEF Score (0–100) aggregates all these metrics — EPS growth, ROE, debt levels, valuation, and dividend consistency — into a single number. Instead of manually calculating each ratio for 300+ companies, you can use the Score Leaderboard to instantly see which companies score highest on fundamentals. It's a starting point, not a final verdict — always do your own research before investing.