I believe fundamental analysis should focus on financial resilience rather than simply identifying stocks with low share prices or attractive valuation ratios.
A current ratio below 1 may indicate liquidity concerns, but its significance depends on the business model, cash conversion cycle and access to financing. Similarly, a high debt-to-equity ratio is not necessarily problematic if operating cash flow and interest coverage remain strong.
I would also examine the composition of current assets. Cash is generally more liquid than inventory or receivables, which may not be fully recoverable.
Comparing companies within the same sector is essential, but ratios should be assessed alongside profitability, free cash flow and earnings quality.
Ultimately, a low valuation does not automatically represent good value. I prefer financially resilient businesses with sustainable competitive advantages, manageable leverage and consistent cash generation.
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