Fundamental Analysis

Fundamental analysis is one of the cornerstones of investing, and gives you tools to help determine the value of different investments. From SWOT analysis to PE ratios, learn the tools of fundamental analysis here.

Frequently Asked Questions
  • What is the difference between qualitative and quantitative fundamental analysis?

    Quantitative fundamental analysis analyzes an investment according to easily measured factors, such as the earnings or assets of the company that issued a stock. Qualitative analysis looks at harder to measure factors such as the quality of a company’s management or the strength of its brand. There is not a hard line between the two and some factors can fall into both categories.

  • What is the difference between fundamental analysis and technical analysis?

    Fundamental analysis looks to see whether an investment is overvalued or undervalued based on underlying economic conditions, as well as the finances of the company or other organization that issued a stock or bond. Technical analysis instead looks at patterns in the price of an investment to predict future movements in that investment’s price.

  • Why do investors read financial statements when doing fundamental analysis?

    Financial statements contain many of the key metrics that help investors determine if a company is undervalued or overpriced. Financial statements have a company’s level of profitability, how much it holds in different types of assets, as well as how fast its sales and profits have grown over time. All of these figures are core parts of determining if a company is properly valued.

  • What is a good PE ratio for a stock?

    There is no one answer to this question as different companies will naturally have different PE ratios. For example, mature companies in defensive stock sectors generally have low PE ratios, while early stage companies or companies in fast-growing sectors often have very high PE ratios. To make the most of PE ratio as a metric of company value, make sure to compare PE ratios to similar companies in similar sectors, as well as to the same company at different periods in the past to get better comparisons.

Key Terms

Explore Fundamental Analysis

Thin line graph
What Is Terminal Value (TV)?
What You Should Know About 10-Ks
Business Man Using Calculator
Amortization vs. Depreciation: What's the Difference?
Close up of Accountant or Banker Making Calculations
The Difference Between Bottom-Line and Top-Line Growth
What Makes a Cash Cow?
Economic Moat Definition
Metrics—What They Are, How They're Used
Financial and Technical Data Analysis Graph Showing Search Findings
Porter's 5 Forces
Senior Businessman Business Meeting Financial Presentation
How SWOT (Strength, Weakness, Opportunity, and Threat) Analysis Works
Price to Free Cash Flow Definition
a man looking at papers on his desk in front of a laptop
Fundamentals
Market Value Definition
Business people analyzing documents in front of the computer.
How Can EV/EBITDA Be Used in Conjunction With the Price to Earnings (P/E) Ratio?
Researcher At Microscope
Biotech vs. Pharmaceuticals: What's the Difference?
Businessperson working with laptop, calculator, and business documents
Porter's 5 Forces vs. SWOT Analysis: What's the Difference?
Beautiful beach background for summer travel with sun,coconut tree and beach wooden bed on sand with beautiful blue sea and blue sky. Summer mood sun beach background concept.
An Inside Look at 'Sell in May and Go Away'
Consensus Estimate Definition
Midsection of business people discussing graphs in meeting at office.
Should You Use the EV/EBITDA or P/E Multiple?
A businessman working on desk office with business documents.
How Is Operating Margin And EBITDA Different?
Businessman Using a Mobile Device to Check Market Data
How Do You Value a Stock With Supernormal Dividend Growth Rates?
P/E ratio, price to earnings ratio 3D title for stock market.
What Does a "N/A" P/E Ratio Mean?
Top 3 Pitfalls of Discounted Cash Flow Analysis
A pile of dollars on conference table.
Can a Company Have Too Much Cash?
An entrepreneur working from her laptop in her store.
Understanding Average Selling Price (ASP)
How do you calculate the excess return of an ETF or indexed mutual fund?
A 100 shares note over a stock performance sheet.
Weighted Average Shares vs. Shares Outstanding
How to Become Your Own Stock Analyst
Statistical tools
How the Residual Sum of Squares (RSS) Works
Zeta Model
Traders sitting at terminals in a large room
How to Use the Winsorized Mean
Two young executives having a meeting while working on a laptop.
Understanding Corporate Profit Margins
How Should I Analyze a Company's Financial Statements?
How Is a Company's Stock Price and Market Capitalization Determined?
SEC Form S-1
Wall Street sign with American flags
Dun & Bradstreet (D&B)
What Do Correlation Coefficients Positive, Negative, and Zero Mean?
Earnings Season
Skyscrapers at New York Stock exchange, view from below
What Is the Market Risk Premium?
What Is the Best Measure of Stock Price Volatility?
Entrepreneurs working on documents at table.
Is it better to use fundamental analysis, technical analysis, or quantitative analysis to evaluate long-term investments?
Financial stock market investment trading graph. Candle stick graph chart. Currency exchange rates. Bullish point, Bearish point. trend on technology abstract background
What Is a Macro Environment?
apple macbook laptop in red light
Apple’s Key Weaknesses
How to Read the Michigan Consumer Sentiment Index
Financial Statement, Pen and Calculator on Table
How Do I Read and Analyze an Income Statement?
A business woman analyzing financial data.
Cash Flow Per Share
Blocks reading "EBITDA" over charts
What Is Considered a Healthy EV/EBITDA ?
EBIT word built with letter cubes on Breaking News Updates | Latest News Headlines | Photos & News Videospaper background.
EBIT/EV Multiple Definition
A Biotech Sector Primer
An image of hand holding financial bill with graph and laptop on table.
Which is better: A high or low equity multiplier?
Analysis of Variances (ANOVA)
An entrepreneur talking phone and Trading discussion a analysis graph stock market trading on monitor screen.
Fundamental Analysis for Traders
4 Leverage Ratios Used in Evaluating Energy Firms
A Businessman analyze investment marketing data.
What Are the Components of a Risk Premium?
Chinese Businesswoman Sticking Notes on Glass With Colleague
What Strategies Do Companies Employ to Increase Market Share?
A businessman analyzing graphs at desk in office.
Analyzing Operating Margins
A full frame shot of stock market data.
Multicollinearity
Walmart parking with a fire truck.
Analyzing Walmart's Debt Ratios in 2020 (WMT)
Captain America (Chris Evans) and Iron Man (Robert Downey Jr) in Captain America: Civil War
Highest-Grossing Movie Franchises
Analyzing Retail Stocks
Operating Cash Flow vs. Net Operating Income: What’s the Difference?

Fundamental Analysis