What is fundamental analysis?

 Fundamental analysis is a method of evaluating the intrinsic value of a security by analyzing its financial and economic characteristics. The goal of fundamental analysis is to determine the intrinsic value of a security and compare it to its current market price to determine whether it is undervalued or overvalued. If the intrinsic value is higher than the current market price, the security may be considered undervalued and a good investment opportunity. If the intrinsic value is lower than the current market price, the security may be considered overvalued and not a good investment.

Fundamental analysts typically use a wide range of financial and economic data to perform their analysis, including a company's financial statements, industry trends, and macroeconomic factors. Financial statements, such as a company's balance sheet, income statement, and cash flow statement, provide information about a company's financial health and performance. Industry trends and macroeconomic factors, such as changes in consumer demand and government policies, can also affect a company's financial performance and intrinsic value.

Fundamental analysis can be a useful tool for investors, but it is important to recognize that it is subject to limitations and biases. For example, the intrinsic value of a security is not always easy to determine, and different analysts may come to different conclusions about a security's intrinsic value based on their own assumptions and interpretations of the data. In addition, fundamental analysis should not be used in isolation, but rather as one component of a larger investment strategy.