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Reviewed by Oct 25, 2021| Updated on
Fundamental analysis is a mechanism which is used to determine a stocks actual or """"fair market"""" value. Fundamental analysts look for a stock which is currently trading at a price that is either higher or lower when compared to its real value.
During fundamental analysis, a business will be looked at from the most basic financial level. This kind of analysis will help in examining a companys key ratios for determining its financial health. In simple words, fundamental analysis is examining a business, its history, the economy, and the market in order to put together an investment decision concerning a particular stock.
Fundamental analysis helps in evaluating a stocks intrinsic value in order to find out its long-term investing opportunities. This analysis will also consider the overall condition of the economy and elements such as production, interest rates, employment, earnings, housing, GDP, management, and manufacturing.
Fundamental analysis can be executed with the help of two primary approaches- bottom up analysis and top down analysis. Fundamental analysis is done on data concerning the past and present; however, the aim is to make financial forecasts. Fundamental analysts make use of either the bottom-up or the top-down analysis. In certain scenarios, both methods of analysis could be used.