Here’s a clear explanation of Fundamental Analysis:
What is Fundamental Analysis?
Fundamental analysis is a method used by investors to evaluate the true value of a stock or any other financial asset by examining the underlying factors that affect its business and overall economy. Unlike technical analysis, which looks at price charts, fundamental analysis focuses on financial statements, company performance, industry conditions, and economic indicators.
Key aspects studied in fundamental analysis include:
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Revenue and profits of the company
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Assets and liabilities
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Management quality and company strategy
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Market competition and growth potential
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Economic factors like interest rates, inflation, and GDP
The goal is to determine whether a stock is undervalued or overvalued compared to its current market price. Investors use this information to decide whether to buy, hold, or sell a stock for long-term gains.
Why Use Fundamental Analysis?
It helps investors understand a company’s real worth and make informed decisions based on its financial health and future prospects rather than just price movements.
In short, fundamental analysis is about analyzing the business behind the stock to find its true value.