Fundamental Analysis: Principles, Types, and How to Use It

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What Is Fundamental Analysis?

Fundamental analysis (FA) measures a security’s intrinsic value by examining related economic and financial factors. Intrinsic value is the value of an investment based on the issuing company’s financial situation and current market and economic conditions.

Fundamental analysts study anything that can affect the security’s value, from macroeconomic factors such as the state of the economy and industry conditions to microeconomic factors like the effectiveness of the company’s management.

The end goal is to determine a number that an investor can compare with a security’s current price to see whether the security is undervalued or overvalued by other investors.