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Chapter 3. Trend Interpretation: Decidin... > Sales Trends: Identifying Core Reven...

Sales Trends: Identifying Core Revenue

The popular starting point in fundamental analysis is sales. From the apparent trend in sales, your analysis naturally leads to other related areas of interest: operating statement ratios, earnings per share, working capital, and capitalization, for example. A study of sales is the first step in the analysis and may also include a detailed summary of sales, gross profit, expenses, and net margin trends. The trends themselves can be further explained or clarified by also observing related trends in debt ratio, post-core-earnings PE, and other indicators. These include price and trading range analysis (remembering that this technical study may also explain any volatility you find in the fundamental indicators) and other fundamentals.

Key Point: Any initial indication derived from the study of an indicator should lead to secondary analysis in greater detail. It's a mistake to limit our efforts to a narrowly focused series of trends.



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