InvestmentFinancial Glossary
Fundamental Analysis
Definition
A method of evaluating a security's intrinsic value by examining related economic, financial, and qualitative factors. This includes studying financial statements (revenue, profit, cash flow), industry dynamics, competitive advantages, management quality, and macroeconomic conditions.
Why It Matters
Fundamental analysis helps you decide what to buy, while technical analysis helps decide when. For long-term investors, fundamentals matter most. Key metrics to watch include PE ratio, ROE, debt-to-equity, free cash flow, and revenue growth. Stocks trading below their intrinsic value (determined through fundamental analysis) offer a margin of safety.