What You Need to Know About Investment Analysis

When jumping into the world of investing, you don’t want to go in blindfolded.

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When jumping into the world of investing, you don’t want to go in blindfolded. You’re going to want some kind of a road map. That’s when investment analysis comes in.

Investment analysis describes different methods of evaluating an investment and market trends to determine if a specific security is suitable for you and your investing goals.

It also involves different types of research methods to determine price movements.

So let’s take a closer look at some of the most common investment analysis strategies.

Fundamental Analysis

Fundamental analysis involves evaluating a company’s financials and market conditions to determine its intrinsic or true value. It begins by evaluating a company’s financial statements.

So investors may want to take a close look at the following.

Balance Sheet

This provides you with a glimpse at a company’s assets, liabilities, and what is left over—also known as shareholders’ equity.

Income Statement

This shows a company’s expenses, revenue, and profits or losses. These details can help you figure out the firm’s profit margin or how much of each dollar in sales the company gets to keep as profit.

Statement of Cash Flows

This helps you understand how much money is flowing in and out of the company. It’s broken down into three categories. Cash from operations expresses how much money the company makes through business activities. Cash from investing shows money made from investments not interconnected with the company’s main business. And cash from financing is the money raised to fund the business.

Moreover, companies are required to report certain documents to the Securities and Exchange Commission (SEC). These documents include crucial financial data and other important information about the company. Here are some examples:

• Form 10-K (annual report)
• Form 10-Q (quarterly report)
• Form 8-K (current events report)

You can access these documents on the SEC’s EDGAR database. Many can also be found on the investors section of the company’s official website.

Investors also compare this information to that of competitors and other companies in the same sector to get a measure of a company’s competitiveness.

Moreover, investors use all this information to determine if a stock or other security is overvalued or undervalued. In other words, is it selling for more or less than it is actually worth based on the available financial and economic data?

In addition, fundamental analysts also take a look at the company’s management team, its brand awareness, business models, and other factors that may not be as obvious as the numbers. This helps them get a sense of their potential for profitability. And it can all help investors determine whether they want to buy, hold, or sell a particular stock.

Technical Analysis

Technical analysis differs from fundamental analysis. It revolves around historical price data and trading volume to determine future price movements of a stock using various charts.

Technical analysts believe that all fundamentals are already accurately factored into the stock’s price. And, therefore, it’s not as important to focus on things like a company’s financials.

Technical analysis ultimately focuses on studying how supply and demand for a security influence factors like price, volume, and implied volatility.

Technical analysts believe that past trading activity can be used to determine future price movements. Technical analysis involves numerous charting tools used to gather trading signals. In fact, it includes hundreds of patterns and signals.

Investors engaged in technical analysis take a close look at the following:

• price trends
• chart patterns
• volume and momentum indicators
• moving averages
• support and resistance levels
• oscillators (indicators that inform whether the price of a financial instrument is very high or very low)

Technical analysis can be complex, and it often involves advanced trading systems that help investors forecast potential price movements.

The Bottom Line

Investment analysis involves research methods to help determine a stock’s value and potential price movements. These methods can help you determine whether a specific security would be suitable for your portfolio.

There are two main types of investment research analysis: fundamental and technical. Fundamental analysis focuses on figuring out a stock’s true value by taking a laser-focused view at factors like a company’s revenue, profits, debts, management team, and more. Technical analysis assumes all these already accurately reflect a stock’s price. So, instead, it focuses on using charting tools to determine patterns and trends that can predict future price movements. Technical analysis relies on price and volume.

The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.