Fundamental Analysis

Fundamental analysis is the examination of the factors that affect the well being of the economy, industry groups, and companies. The fundamental analysis determines the health and performance of an underlying company/stock by looking at all the factors that can affect the price of the security. These factors include overall economic state, industry growth, sector performance, company’s relative performance to it’s peers, and company’s own future prospects. There are several possible objectives of fundamental analysis like, to perform company stock valuation and predict its probable price evolution, to calculate its credit risk, to find the out the intrinsic value of the share. Investors also perform fundamental analysis by observing the financial statements of various companies to derive their true values (intrinsic values) which help them to understand whether a company is overvalued or undervalued and take a call to buy or sell accordingly.