Fundamental stock analysis is a special type of stock analysis that uses company-specific and macroeconomic data. This includes, for example, the company’s balance sheet or income statement.
The idea behind fundamental stock analysis
In principle, fundamental stock analysis assumes that, in addition to the actual stock market price, there is also a so-called intrinsic value of the company. This company value is determined with the help of fundamental analysis. Sooner or later, the stock market price adjusts to the company value.
For the company valuation, analysts can rely on quantitative or qualitative criteria. The quantitative view looks at the pure business figures in the company. The qualitative approach also looks at the industry, the business concept and the management. With both approaches, however, there is always individual scope for analysts to make their own assessments. This can lead to several analysts arriving at a different company value, even though they are looking at the same company.
The data from fundamental stock analysis, as well as the recommendations and forecasts that can be derived from it, can serve as a guide and thought process for investors.
What recommendations can be derived from this type of stock analysis?
If the current share price on the stock market is below the value of the company, one should invest in shares. The chances of a price increase are then very good.