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

 Price-to-Earnings (P/E) Ratio
P/E Ratio Definition: Price-to-Earnings Ratio Formula and Examples
Terminal Value
Terminal Value (TV) Definition and How to Find The Value (With Formula)
10-K: Definition, What's Included, Instructions, and Where to Find it
Business Man Using Calculator
Amortization vs. Depreciation: What's the Difference?
Close up of Accountant or Banker Making Calculations
Bottom-Line Growth vs. Top-Line Growth: What's the Difference?
Cash Cow: Definition, Investment Type, and Examples
Metrics: Measures of quantitative assessment commonly used for assessing, comparing, and tracking performance or production.
Porter's 5 Forces
Porter's 5 Forces Explained and How to Use the Model
 SWOT Analysis
SWOT Analysis: How To With Table and Example
Business Graph and Charts
What Causes Dividends per Share to Decrease?
Price to Free Cash Flow: Definition, Uses, and Calculation
a man looking at papers on his desk in front of a laptop
What Are Fundamentals? Types, Common Analysis Ratios, and Example
What Is Market Value, and Why Does It Matter to Investors?
Business people analyzing documents in front of the computer.
Using EV/EBITDA and Price-to-Earnings (P/E) Ratios to Assess a Company
Researcher At Microscope
Biotechnology 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?
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Sell in May and Go Away': Definition, Statistics, and Drawbacks
Consensus Estimate: Definition, How It Works, and Example
Midsection of business people discussing graphs in meeting at office.
Should You Pay More Attention to the EV/EBITDA or P/E Multiple?
A businessman working on desk office with business documents.
Operating Margin vs. EBITDA: What's the Difference?
Businessman Using a Mobile Device to Check Market Data
Valuing a Stock With Supernormal Dividend Growth Rates
P/E ratio, price to earnings ratio 3D title for stock market.
What Does It Mean When a Company's P/E Ratio Reads "N/A"?
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.
Average Selling Price (ASP): Definition, Calculation and Examples
Earnings Before Interest, Depreciation, and Amortization (EBIDA)
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
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Economic Depreciation: Definition, Vs. Accounting Depreciation
Statistical tools
Residual Sum of Squares (RSS): What It Is, How to Calculate It
Zeta Model Definition
Traders sitting at terminals in a large room
Winsorized Mean: Formula, Examples and Meaning
Can Whirlpool Remain Durable?
Two young executives having a meeting while working on a laptop.
How to Analyze Corporate Profit Margins
Research and Development
Research and Development (R&D) Definition, Types, and Importance
Stock market data on digital display.
Cyclical vs. Non-Cyclical Stocks: What's the Difference?
How Should I Analyze a Company's Financial Statements?
How Are a Company's Stock Price and Market Cap Determined?
SEC Form S-1: What It Is, How to File It or Amend It
Wall Street sign with American flags
Dun & Bradstreet (D&B): What It Does, Funding, History, and Rating
Stock Market Board
Specific Identification Inventory Valuation Method
A businessman analyzing graphs and documents, using a calculator.
Comparing ETF Gross vs. Net Expense Ratios
Midsection Businessmen Analyzing Charts on Laptop in Office
Multiple Compression: Meaning, Overview, Examples
Diluted Normalized Earnings Per Share
Diluted Normalized Earnings Per Share
Attest Service
Attest Service: What it is, How it Works
Accounting Postulate
Accounting Postulate: What it is, How it Works
Correlation Coefficients: Positive, Negative, and Zero
Primary Distribution: What it is, How it Works, Example
Earnings Season: What it is, How it Works
Buy: What it Means, Consumer Versus Business, Types
Work Cell: What it is, How it Works, Example
Skyscrapers at New York Stock exchange, view from below
What Is Market Risk Premium? Explanation and Use in Investing
What Is the Best Measure of Stock Price Volatility?
Entrepreneurs working on documents at table.
When to Use Fundamental, Technical, and Quantitative Analysis
Macro Environment
Macro Environment: What It Means in Economics, and Key Factors
What Are Some Examples of Companies That Have High Capital Expenditures (CapEx)?
Shopping Spree
Collaborative Commerce: What it is, How it Works, Examples
Anti-Fragility: Definition, Overview, FAQ

Fundamental Analysis