Investing in the stock market requires more than just intuition or following trends. One of the most effective ways to identify high-quality stocks with strong growth potential is through fundamental analysis. This investment approach is widely used by both seasoned and novice investors in the Philippines, as it helps uncover undervalued stocks that could provide long-term financial gains.
What is Fundamental Analysis?
Fundamental analysis involves evaluating a company’s financial health, industry position, and broader economic factors to determine its intrinsic value—or what the stock is truly worth, regardless of short-term market fluctuations. By analyzing key financial statements, business models, and competitive advantages, investors can make informed decisions rather than relying on speculation or market hype.
This approach is particularly useful in a dynamic market like the Philippine Stock Exchange (PSE), where several factors—such as economic growth, government policies, and consumer spending—play a crucial role in shaping a company’s performance.
Why is Fundamental Analysis Important for Philippine Investors?
The Philippines is one of Southeast Asia’s fastest-growing economies, with a robust consumer-driven market and increasing foreign investments. While this growth presents many investment opportunities, it also comes with market volatility and risks. Investors who rely purely on speculation may find themselves caught in price fluctuations and short-term market corrections, leading to losses.
By using fundamental analysis, investors can:
Identify financially strong companies that can withstand economic downturns.
Spot undervalued stocks with long-term growth potential.
Make rational investment decisions based on facts rather than emotions.
Understand the business models of the companies they invest in.
Key Metrics Used in Fundamental Analysis
To assess a company’s financial health, investors analyze several key indicators, including:
- Revenue and Earnings Growth – A company with consistent revenue and profit growth indicates strong demand for its products/services.
- Price-to-Earnings (P/E) Ratio – Helps determine if a stock is overvalued or undervalued relative to its earnings.
- Debt-to-Equity (D/E) Ratio – A high D/E ratio may indicate financial risk, while a low ratio suggests stable financial management.
- Return on Equity (ROE) – Measures a company’s profitability in relation to shareholder equity. Higher ROE suggests efficient capital use.
- Dividend Yield – Shows how much income an investor earns through dividends relative to the stock price.
By analyzing these financial metrics alongside macroeconomic conditions and industry trends, investors can gain a comprehensive understanding of a company’s growth potential.
 5 Examples of Stocks to Which You can Apply Fundamental Analysis
Jollibee Food Corporation
- Strong fundamentals support the business. A lesser combination of growth, profitability, debt, and visibility exists in more than 70% of businesses.
- Overall and in the near future, the business offers an intriguing fundamental situation.
Strengths:Â
- Analysts presently project a very strong rate of earnings growth for the upcoming years.
- The sales projection has been increased quite a little during the past 12 months.
- The EPS projections of the stock’s analysts have been significantly revised upward during the past year.
- For the past four months, the company has experienced consistently and considerably higher EPS revisions.
- Analysts are optimistic about this stock. The stock should be purchased or overweighted, according to the average consensus.
- Over the past four months, analysts who are interested in the stock have significantly raised their average price targets.
- Over the previous four months, there has been a marked improvement in analyst opinion.
- The judgments of analysts have been sharply revised upward over the last twelve months.
- The group typically announces positive findings with high surprise rates.
Weaknesses:
- The company operates with high earnings multiples, with predicted P/E ratios for the current and following fiscal years of 33.37 and 27.87, respectively.
- The size of the balance sheet suggests that the company is highly valued.
- The company offers shareholders little to no dividends. It is not a yield company as a result.
- The consensus analysts’ price targets are quite different from one another. This demonstrates varying opinions and/or a challenge in appraising the business.
Globe TelecomÂ
Strengths:
- The company’s margins are especially strong before interest, taxes, depreciation, and amortization.
- The company has one of the highest expected dividend yields in the market.
- Analysts have been gradually raising their EPS projection for the upcoming fiscal year over the past twelve months.
- Over the past four months, the perception of analysts who cover the stock has improved.
- Over the past 12 months, consensus analysts’ assessments of the company have undergone a significant revision.
Weakness:
- A glaring issue is the company’s projected earnings per share (EPS) growth over the following few years.
- The company’s financial state is one of its main weaknesses.
- Over the past four months, analysts who are interested in the stock have drastically lowered their average price targets.
- Analysts who follow the company have varying price targets. This suggests that it may be challenging to evaluate the company and its operations.
- The corporation typically disappoints with its earnings announcements.
San Miguel Food and Beverage
- Based on a relative rating of the company within its sector, the company’s Refinitiv ESG score is particularly poor.
Strengths:
- Currently, San Miguel Food and Beverage do not show any significant strength
Weakness:
- The company frequently reports earnings that are below expectations.
McDonald’s
- The company looks to be particularly low regarded from a medium and long-term investment perspective based on a variety of fundamental qualitative factors.
- According to Refinitiv, the corporation has a strong ESG score when compared to its industry.
Strengths:
- The company has significant margins before depreciation, amortization, and taxes as a result of its comparatively high EBITDA/Sales ratio.
- The company’s margins rank among the highest on the stock exchange list. Its main business generates considerable earnings.
- Analysts are optimistic about this stock. The stock should be purchased or overweighted, according to the average consensus.
- The group’s efforts in the upcoming years are highly visible. Analysts that follow the equity continue to have similar predictions for future earnings. Sales for the current and succeeding fiscal years are supported by such sparsely dispersed estimates as being highly predictable.
Weaknesses:
- Analysts predict that this category of companies will have one of the lowest rates of growth.
- The company’s finances are hampered by a large amount of debt and relatively low EBITDA levels.
- The company operates with high earnings multiples, with predicted P/E ratios for the current and following fiscal years of 33.11 and 25.76, respectively.
- The corporation has one of the greatest “enterprise value to sales” ratios in the entire world.
- Given the cash flows produced by the company’s operations, it is valued significantly.
- Sales forecasts have been dramatically revised downward during the past twelve months, which suggests that lower-than-expected sales volumes are anticipated for the current fiscal year.
- Analysts have dramatically lowered their earnings projections over the past year.
Planet Fitness
Strengths:
- One of the company’s key strengths is the anticipated significant growth for the upcoming fiscal years.
- According to the consensus of analysts that cover the stock, the company’s earnings per share (EPS) are anticipated to increase significantly over the following several years.
- The company has significant margins before depreciation, amortization, and taxes as a result of its comparatively high EBITDA/Sales ratio.
- Analysts have consistently increased their sales projection for the company over the past year.
- Analysts who follow this firm typically advise overweighting or buying the stock.
- Over the past four months, the perception of analysts who cover the stock has improved.
- The judgments of analysts have been sharply revised upward over the last twelve months.
- The group’s efforts in the upcoming years are highly visible. Analysts that follow the equity continue to have similar predictions for future earnings. Sales for the current and succeeding fiscal years are supported by such sparsely dispersed estimates as being highly predictable.
Weaknesses:
- With enormous debt and very low EBITDA, the corporation is in a difficult financial position.
- The corporation is valued rather well based on earnings multiples. In fact, the company is receiving 62.44 times its projected earnings per share for the current fiscal year.
- The corporation has exceptionally high valuation levels based on current prices.
- Given the cash flows produced by its operations, the corporation is highly valued.
- Analysts’ average price targets have been dramatically revised lower during the previous four months.
- The company typically reports earnings that are lower than anticipated.
Universal Robina Corporation
Strengths:
- The sales projection has been increased several times over the past twelve months.
- Analysts have continually increased their revenue projections for the company, which offers promising opportunities for revenue development in the current and following years.
- Analysts are optimistic about this stock. The stock should be purchased or overweighted, according to the average consensus.
- The average price objective of analysts has dramatically increased during the last four months.
- Over the previous four months, there has been a marked improvement in analyst opinion.
- The judgments of analysts have been sharply revised upward over the last twelve months.
Weaknesses:
- A obvious flaw is the company’s projected earnings per share (EPS) growth over the following few years.
- High earnings multiple valuations are advantageous to the company.
- The company frequently reports earnings that are below expectations.
Ayala Corporation
Strengths:
- The company’s value level is a benefit because of the favorable cash flows that its operations generate.
- Analysts who follow this firm typically advise overweighting or buying the stock.
- The average target price set by analysts who cover the stock is higher than current pricing and has a significant potential for appreciation.
Weaknesses:
- The company’s finances are hampered by a large amount of debt and relatively low EBITDA levels.
- When it comes to paying out dividends to shareholders, the corporation is not the most generous.
- Over the past four months, analysts who are interested in the stock have drastically lowered their average price targets.
- The analysts’ consensus has been dramatically revised lower over the last year.
- Analysts who follow the company have varying price targets. This suggests that it may be challenging to evaluate the company and its operations.
- Financial reports have consistently let down market participants. They frequently fell short of expectations.
Metro Pacific Investment Corporation
Strengths:
- The company’s margins are especially strong before interest, taxes, depreciation, and amortization.
- The company’s margins rank among the highest on the stock exchange list. Its main business generates considerable earnings.
- Regarding pricing based on earnings multiples, the equities is among the most appealing on the market.
- The stock price of the company appears to be relatively low when compared to its net book value.
- Analysts who follow this firm typically advise overweighting or buying the stock.
- The average target price set by analysts who cover the stock is higher than current pricing and has a significant potential for appreciation.
Weaknesses:
- The company’s financial state is one of its main weaknesses.
- The corporation has one of the greatest “enterprise value to sales” ratios in the entire world.
- Over the past four months, the stock’s average consensus view among analysts who cover it has gotten worse.
- Analysts who follow the company have varying price targets. This suggests that it may be challenging to evaluate the company and its operations.
- The corporation typically disappoints with its earnings announcements.
Aboitiz Equity Ventures
- The company’s fundamentals are weak overall, making it unsuitable for medium- to long-term investment.
Strengths:
- The sales projection has been increased several times over the past twelve months.
- Analysts have dramatically increased their estimates of the company’s sales during the past four months.
- Over the past four months, analysts who are interested in the stock have significantly raised their average price targets.
Overall, You can apply fundamental analysis in every stock you can find in the Stock market in order to assess the situation before entering a trade.
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nformation on this site is for informational purposes only and should not be considered financial advice. We are not financial advisors, and our content should not be taken as professional recommendations. Consult a qualified financial advisor before making any decisions. We are not liable for any losses resulting from reliance on our content.
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A multi-award-winning blogger and advocate for OFWs and investment literacy; recipient of the Mass Media Advocacy Award, Philippine Expat Blog Award, and Most Outstanding Balikbayan Award. Her first book, The Global Filipino Bloggers OFW Edition, was launched at the Philippine Embassy in Kuwait. A certified Registered Financial Planner of the Philippines specializing in the Stock Market. A recognized author of the National Book Development Board of the Philippines. Co-founder of Teachers Specialist Organization in Kuwait (TSOK) and Filipino Bloggers in Kuwait (FBK). An international member of writing and poetry. Published more than 10 books. Read more: About DiaryNiGracia
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