Every stock has a share price. But how do you know whether it’s really worth what “the market” says it’s worth? Many investors try to answer that question by engaging in fundamental analysis.
What Is Fundamental Analysis?
Fundamental analysis is a method used to find a stock’s intrinsic or “true” value by evaluating metrics such as the company’s revenue, expenses, and profits. It also takes into account other less tangible factors such as the strength of its management team, the quality of its business model, its reputation, and where it stands in its industry, as well as the overall economy.Investors put a magnifying glass to this and other data to determine whether a company is overvalued or undervalued. It also gives investors a raw view of whether the company is poised to succeed or struggling and vulnerable to major downturns.
