One of the major types of analysis used when trading to predict stock prices.
Traders analyse companies by taking into account sales, earnings, products or services, and analyse the economy by taking into account factors like GDP, interest rates and unemployment.
This differs from technical research, which uses past prices and trading to predict future prices.
For example, an investor can perform fundamental analysis on a bond’s value by looking at economic factors, such as interest rates and the overall state of the economy, and information about the bond issuer, such as potential changes in credit ratings.
For assessing stocks, this method uses revenues, earnings, future growth, return on equity, profit margins and other data to determine a company’s underlying value and potential for future growth.
In terms of stocks, fundamental analysis focuses on the financial statements of the company being evaluated.