What is Fundamental Analysis?
Fundamental analysis is a method of evaluating the intrinsic value of a company or security by analyzing various financial and economic factors. The goal of fundamental analysis is to determine the underlying value of an asset, such as a stock or bond, by looking at financial statements, management quality, industry trends, and overall economic conditions.
The process typically involves analyzing a company's financial statements, such as the balance sheet, income statement, and cash flow statement, to understand the company's financial health, revenue and profit trends, and management efficiency. It also includes studying the company's management, board of directors, and business model, to assess the company's long-term prospects. Additionally, analysts will study the industry, including trends, competitors, and regulatory environment to evaluate the company's position within the industry and to identify any potential future risks and opportunities.
Some of the key metrics used in the fundamental analysis are Earnings per Share (EPS), Price to Earnings Ratio (P/E ratio), Return on Equity (ROE), and Debt-to-Equity ratio.
fundamental analysis is a long-term oriented method, that aims to identify undervalued assets that have the potential to increase in value over time, by evaluating the fundamental economic and financial factors of a company. It is used by investors and portfolio managers to make informed decisions about buying and selling securities, as well as for making medium-long-term investment decisions.