Fundamental analysis

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Fundamental analysis is a method of evaluating a security or commodity by looking at the facts underlying a company or market, as opposed to technical analysis, which is based on price and volume information (charting). Fundamental analysis examines a security or company's intrinsic value in relation to economic, financial and other factors. It includes the study of macroeconomic factors such as industry conditions and individual factors such as the company's management and financial condition. It is also called quantitative analysis. [1] Most large brokerages use both fundamental and technical analysis.

The major part of fundamental analysis for securities involves delving into a company's financial statements. The analyst looks at revenue, expenses, assets, liabilities and all the other financial aspects of a company.[2]

Some of the important aspects of a company's financials that investors look at to determine value are: Earnings per share; P/E ratio; projected earnings growth; price to book; dividend yield; book value.[3]

In the futures markets, a fundamental analysis focuses on the relationship between the commodity and it's price.

References

  1. Fundamental Analysis. Investopedia.
  2. Fundamental Analysis: Introduction. Investopedia.
  3. Fundamental Analysis. About.com.