What it is
Fundamental analysis is a method of measuring the “real” value of an asset or a company to help you figure out if it’s worth investing in.
It generally involves looking at a company’s past and present financial performance, prospects for growth, and factors that can affect its value over time.
What it means for you
Investors typically perform fundamental analysis when they want to know if it’s a good idea to invest in a certain product or company.
They aim to find out if the current price of an asset reflects its true or “fair market” value. This will help them decide whether to buy, hold, or sell.
There are different ways to assess a company’s fundamentals, but it is typically done by checking financial statements to know if a company is profitable and has, at most, a manageable amount of debt.
Analysts also consider the health of the larger industry as well as related economic factors that may impact growth.
This method differs from technical analysis, which mainly involves tracking price trends and patterns to get an idea of future prices.
