What is fundamental analysis?

What is fundamental analysis?

Fundamental analysis is the opposite of technical analysis. Instead of looking at charts, it focuses on the underlying business to decide whether a stock is a good investment. The goal is to figure out what a company is really worth and whether its current share price is too high, too low or fair.

To do this, investors look at financial statements, such as profits, revenues and debts. They may also consider measures like earnings per share, price to earnings rations, dividends and market share. Beyond the numbers, they study things like management quality, industry trends and economic conditions.

If the analysis shows that a company’s shares are trading below what it’s worth, the stock is considered undervalued and might be a good buy. If the shares look overpriced companred to the fundamentals, investors might avoid it. Fundamental analysis is a way to think like a business owner. Instead of seeing stocks as jsut numbers on a screen, you see them as pieces of real companies. Whilst it can be more complex than looking at a chart, it provides a longer term view that may successful investors rely on.