Fundamental Analysis of Stocks
Fundamental analysis is a tool to evaluate the actual or fair market value of a stock. Fundamental analysts search for stocks that are selling at higher or lower prices than their actual value. The stock is considered to be undervalued and a buying recommendation is issued if the fair market value is higher than the market price.
It takes several factors into account, including revenue, asset management, and the production of a business as well as an interest rate.
Many investors use fundamental analysis alone, but it can be particularly helpful to use it in combination with other tools to evaluate stocks for investment purposes. The goal is to determine the current worth of the stock, and, perhaps more importantly, to identify how the market values the stock.
Two types of fundamental analysis
A study involving brand value, management decisions, the company's financial performance over a specified time period, and other similar factors constitute qualitative analysis.
Quantitative financial analysis of stock means a purely numerical analysis that considers the company's financial statements and derives the share price from the observations.
Difference between Qualitative and Quantitative analysis
The first is a top-down approach, while the second is a bottom-up approach.
The top-down approach investigates macroeconomic factors first, before delving into the specific company. The bottom-up approach, on the other hand, analyses the company first and then examines the impact of macroeconomic factors on the company's performance.
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