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

P/E Ratio - Price-to-Earnings Ratio Formula, Meaning, and Examples
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Terminal Value (TV) Definition
10-K Definition
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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?
Metrics—What They Are, How They're Used
Financial and Technical Data Analysis Graph Showing Search Findings
Porter's 5 Forces Explained and How to Use the Model
Senior Businessman Business Meeting Financial Presentation
SWOT Analysis: How To With Table and Example
What Is the Price to Free Cash Flow Ratio?
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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?
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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?
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An Inside Look at 'Sell in May and Go Away'
Consensus Estimate Definition
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Should You Use the EV/EBITDA or P/E Multiple?
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Operating Margin vs. EBITDA: What's the Difference?
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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
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Can a Company Have Too Much Cash?
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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
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How to Use the Winsorized Mean
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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
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Dun & Bradstreet (D&B)
What Do Correlation Coefficients Positive, Negative, and Zero Mean?
Earnings Season
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What Is Market Risk Premium?
What Is the Best Measure of Stock Price Volatility?
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Is it better to use fundamental analysis, technical analysis, or quantitative analysis to evaluate long-term investments?
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What Is a Macro Environment?
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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?
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Cash Flow Per Share
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What Is Considered a Healthy EV/EBITDA ?
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EBIT/EV Multiple Definition
A Biotech Sector Primer
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Which is better: A high or low equity multiplier?
Analysis of Variances (ANOVA)
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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?
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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.
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Analyzing Walmart's Debt Ratios in 2020 (WMT)
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What Are the Highest-Grossing Movie Franchises?
Analyzing Retail Stocks
Operating Cash Flow vs. Net Operating Income: What’s the Difference?

Fundamental Analysis