How to analyze stocks — fundamental analysis 2026

Fundamental analysis — key to smart investing

In 2026, only 23% of Polish investors conduct fundamental analysis before buying stocks, the rest are driven by emotions or internet tips. Meanwhile, investors using systematic analysis achieve on average 4.7% better annual results than the market.

Fundamental analysis statistics in Poland:

• Average analysis time: 2.3 hours per company (professionals: 15+ hours)
• Fundamental investors' ROI: 12.8% annually (vs 8.1% market)
• Most popular indicators: P/E (89%), P/BV (67%), ROE (45%)
• Valuation error: Average 18% difference between price and intrinsic value

What is fundamental analysis?

Fundamental analysis is the process of evaluating a company's real value based on its:

• Financial situation
• Competitive position
• Development prospects
• Macroeconomic conditions

Goal: Find companies trading below their true value.

3-level analysis model

Level 1: Macroeconomic analysis (20% of time)

• Economic situation of country/region
• Trends in company's sector
• Economic cycles
• Monetary and fiscal policy

Level 2: Sector analysis (30% of time)

• Sector growth dynamics
• Entry barriers and competition
• Legal regulations
• Technology trends

Level 3: Company analysis (50% of time)

• Financial statements
• Business model and strategy
• Management and corporate governance
• Financial ratios

Key financial ratios

1. Profitability ratios

ROE (Return on Equity):

ROE = Net profit / Shareholders' equity × 100%

• Good level: >15% (depends on sector)
• Interpretation: How effectively management uses shareholder capital

ROA (Return on Assets):

ROA = Net profit / Total assets × 100%

• Good level: >5-8%
• Interpretation: Productivity of all company assets

Net profit margin:

Net margin = Net profit / Revenue × 100%

• High margin: >10% (premium industries)
• Average margin: 3-7% (mass industries)

2. Valuation ratios

P/E (Price to Earnings):

P/E = Share price / Earnings per share

• P/E < 10: Potentially undervalued
• P/E 10-20: Fair valuation
• P/E > 25: Expensive or growth company

P/BV (Price to Book Value):

P/BV = Share price / Book value per share

• P/BV < 1: Shares below book value
• P/BV 1-2: Reasonable valuation
• P/BV > 3: High growth expectations

PEG (P/E to Growth):

PEG = P/E / Expected earnings growth (%)

• PEG < 1: Attractive valuation relative to growth
• PEG = 1: Fair price
• PEG > 1.5: Overpriced relative to growth

3. Financial liquidity ratios

Current ratio:

Current ratio = Current assets / Current liabilities

• Safe level: 1.5-2.0
• < 1.0: Liquidity problems
• > 3.0: Inefficient capital use

Quick ratio (acid test):

Quick ratio = (Current assets - Inventory) / Current liabilities

• Safe level: >1.0
• Interpretation: Liquidity without selling inventory

Financial statement analysis

1. Income statement

Key items to analyze:

• Revenue: Growth trend, seasonality
• Operating costs: Margins, efficiency
• EBITDA: Profit before depreciation and finance
• Net profit: Bottom line, trends

Red flags:

• Falling revenue in growing market
• Costs rising faster than revenue
• Irregular, one-time profits

2. Balance sheet

Assets side:

• Fixed assets: Production assets
• Current assets: Cash, receivables, inventory
• Intangible assets: Patents, know-how

Liabilities side:

• Shareholders' equity: "Safety cushion"
• Long-term liabilities: Loans, bonds
• Short-term liabilities: Liquidity

3. Cash flows

Most important report for investors:

• Operating cash flows: Does business generate cash?
• Investment flows: Is company investing in development?
• Financing flows: Is company repaying debt, paying dividends?

Business quality assessment

1. Competitive advantages (Economic Moats)

Network effects:

• More users = greater value
• Example: Facebook, Allegro

Scale effect:

• Lower unit costs with larger production
• Example: Amazon, Walmart

Brand power:

• Strong brand allows premium pricing
• Example: Apple, LVMH

High switching costs:

• Difficulty for customers to change suppliers
• Example: Microsoft, Oracle

2. Management quality

Indicators to check:

• Track record: Management history
• Alignment: Does management own company shares?
• Capital allocation: How is money spent?
• Communication: Transparency to shareholders

Sector-specific analysis

Technology:

• Key indicators: P/S, EV/Sales, user growth
• Focus: Innovation, scaling, monetization
• Risks: Disruption, regulations, product cycles

Banks:

• Key indicators: P/BV, ROE, NIM, NPL ratio
• Focus: Credit quality, cost efficiency
• Risks: Credit cycles, regulations, interest rates

Real Estate (REITs):

• Key indicators: FFO, P/FFO, dividend yield, NAV
• Focus: Locations, property types, lease lengths
• Risks: Interest rates, real estate cycles

Retail/Commerce:

• Key indicators: Same-store sales, margins, inventory turns
• Focus: Locations, format, customer experience
• Risks: E-commerce, consumption, trends

Fundamental analysis mistakes

1. Tunnel vision

• Mistake: Focusing only on numbers
• Solution: Consider trends, competition, macro

2. Backward-looking analysis

• Mistake: Analyzing only the past
• Solution: Forward-looking metrics, management guidance

3. Ignoring cycles

• Mistake: Not considering industry cycles
• Solution: Normalize profits through cycles

4. Anchoring bias

• Mistake: Attachment to first valuation
• Solution: Regularly update analysis

Fundamental analysis tools

Free data sources:

• GPW: Current and periodic reports
• Stooq: Financial data of Polish companies
• Bankier.pl: Ratios and analyses
• Freenance: Comprehensive analysis with Polish data

Professional paid tools:

• Bloomberg Terminal: $2,000/month
• FactSet: $1,500/month
• Morningstar: $300/month
• S&P Capital IQ: $1,200/month

Step-by-step analysis process

Step 1: Initial screening (15 min)

• Check basic ratios: P/E, P/BV, ROE
• Assess revenue and profit trends (5 years)
• Check debt and liquidity

Step 2: Sector analysis (30 min)

• Research sector dynamics
• Identify main competitors
• Assess company's competitive position

Step 3: Deep financial analysis (2 hours)

• Analyze last 3 annual reports
• Check trends in key ratios
• Assess earnings and cash flow quality

Step 4: Valuation (1 hour)

• Apply 2-3 valuation methods
• Determine fair value with safety margin
• Compare with current market price

Company valuation methods

1. Multiples valuation

Value = Sector ratio × Company metric
Example: Sector P/E 15 × EPS 5 PLN = 75 PLN per share

2. DCF (Discounted Cash Flow)

Value = Sum of discounted future cash flows

• Most accurate method
• Requires forecasts and assumptions
• Sensitive to discount rates

3. Asset-based valuation

Value = Asset value - Liabilities

• Used for companies with large assets
• Conservative method
• Good for companies in crisis

Practical analysis example

CD Projekt (CDR) analysis:

2025 financial data:

• Market cap: 8.5 billion PLN
• P/E: 22.5
• ROE: 18.3%
• Net margin: 25.4%
• Debt/Equity: 12%

Strengths:

• Strong brand (Witcher, Cyberpunk)
• High margins (digital distribution)
• Experienced team
• Product pipeline

Weaknesses:

• Dependency on hit games
• Long development cycles
• Competition with AAA studios
• Execution risk

Valuation:

• P/E method: 22 × 2.1 PLN EPS = 46 PLN
• P/S method: 4.5 × 12 PLN Sales/share = 54 PLN
• Fair value: 50 PLN (current: 38 PLN)
• Recommendation: BUY with target 50 PLN

Freenance — fundamental analysis tools

Freenance offers advanced analysis tools:

• Stock screener with Polish ratios
• Automatic calculation of all financial ratios
• Sector comparisons with benchmarks
• Alerts for attractive valuations

Unique features:

• Real-time trend analysis
• Company quality scoring model
• Personalized watchlists
• Educational analytical materials

Summary — path to fundamental analysis

For beginners:

1. Start with ETFs on indices
2. Learn basics of reading statements
3. Focus on 5-10 companies from different sectors
4. Use screeners for initial selection

For advanced:

1. Build DCF valuation models
2. Analyze entire portfolios of companies
3. Specialize by sector
4. Combine fundamental with technical analysis

Golden rules:

• Margin of safety: Buy 20-30% below fair value
• Long-term thinking: Fundamental analysis is 3-5 year strategy
• Diversification: Don't put all eggs in one basket
• Continuous learning: Markets change, update knowledge

Remember: Fundamental analysis is both art and science. It requires time, patience and continuous learning, but provides the best long-term results.

Use Freenance analytical tools to systematically analyze Polish companies and build a portfolio based on solid business fundamentals.