What is Fundamental Analysis and stock investing all about?
Fundamental Analysis is a technique which attempts to determine a security's value by focusing on underlying factors that affect a company's actual business and its future prospects. It refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements.
Fundamental Analysis Involves:
- Gathering, analyzing, interpreting company, industry & economic information
- Completely analysing a company's financial statements and finding out their implications
- Performing a bias free valuation in order to come up with a fair value (intrinsic value) of a stock and see whether it is under or overvalued.
What are the Goals of Fundamental Analysis?
- To determine the fair value of a company.
- To evaluate management integrity and internal business decisions
For whom Fundamental Analysis is relevant?
Fundamental Analysis is relevant for -
- Long term investors
- Fund managers
- Financial advisors
- Value Investors
Primarily there are two factors through which fundamental analysis are made- Qualitative & Quantitative. We will go through each of them in the upcoming units.