Fundamental Analysis

Definition

Fundamental analysis is a method of measuring a security's intrinsic value by examining related economic, financial, and qualitative factors. For stocks, this includes analyzing financial statements (income statement, balance sheet, cash flow), revenue growth, profit margins, P/E ratio, debt levels, competitive advantages (moat), and management quality. For the broader economy, it examines GDP, employment, inflation, and interest rates. The goal is to determine whether a security is overvalued, undervalued, or fairly priced relative to its intrinsic value. Value investors like Warren Buffett rely heavily on fundamental analysis to find undervalued companies with strong long-term prospects.