This section is self-contained and dedicated to the study and assessment of the value assigned to a business. In turn, this aims to help investors make intelligent decisions about how to deploy their funds. As the name implies, fundamental analysis is all about the ability to dig deeper into a firm’s basic data in order to come up with a precise idea of how it is doing in terms of using its resources to better serve the very purpose on which it was established. In other words, this type of analysis involves the search for intrinsic value- i.e., the true value of a business using a set of tools and techniques such as financial statements (income statement, cash flow statement, etc.), financial ratios, formulas and comparables, and so on.

Overall, fundamental analysis takes into consideration economic, industry and company-specific conditions in a bid to reach at the true value of a company’s stock. In so doing, it capitalizes on the underlying factors that affect the wellbeing and functioning of the economy at large, sectors and industry, and businesses. At the company level, fundamental analysis involves examination of financial data, quality of management, value proposition and business concept, competition, etc. At the sector and industry level, its focus is the examination of market forces affecting the broader sector/industry including demand and supply and prices, etc. For the economy, this may include using economic data to assess economic growth, real and expected.