Let me explain…
Let's say I have an oil company and I'm in profit now as I send my guys to dig up oil from the earth.
But let’s say that there is this new rare commodity that can replace the oil that’s less hazardous and cheaper.
So when this new commodity comes to the market, you can see that my business is going to suffer because nobody needs oil anymore!
My stock price is going to collapse!
So, how do you actually quantify this?
This qualitative analysis is an insight that someone can glean from and realize that this would be disruptive to the oil stock companies.
Another one could be…
This is a term that I think Warren Buffett came up with.
For example, coca-cola has a strong economic moat, they sell Cola.
But if you want to challenge against them, it can be pretty damn difficult, because they have the brand and the reputation which they've been in business for a long time.
You can't really quantify what this economic moat is and that's another way of looking at the qualitative analysis.
Qualitative analysis can also be involved with analyzing the management.
It can be where the management and CEO are good that continues to improve operations and reduce expenses.
So these are things that cannot be quantified in numbers.
Now, here are the Pros and Cons of using Qualitative analysis