What is fundamental analysis?
Fundamental analysis refers to a method of assessing the intrinsic value of a security by analyzing various macroeconomic and microeconomic factors with the object of making profits while trading in it. Intrinsic value is the value of an investment based on the issuing company’s financial condition and current market and economic situations.
Generally, the primary purpose of fundamental analysis is to determine whether the stock is undervalued or overvalued and thereby make an informed decision to buy, hold, or sell it in order to maximize the profit potential.
Typically, the study of fundamental analysis includes:
- The overall state of the economy
- The strength of the specific industry
- The financial performance of the company issuing the stock