Fundamental Analysis: An Overview
Fundamental analysis is the process of estimating what a company is actually worth (its “intrinsic value”) and comparing that to its current market price — on the premise that the two can diverge in the short term but tend to converge over time. This guide covers top-down vs bottom-up approaches, what each of the three financial statements (Income Statement, Balance Sheet, Cash Flow Statement) reveals and why all three matter together, the qualitative factors numbers can’t capture (competitive moat, management quality, governance, industry dynamics), the two broad valuation approaches (relative valuation using multiples, and Discounted Cash Flow), where to actually find this information (annual reports, investor presentations, earnings calls, exchange filings), and the honest limitations — it’s time-consuming, doesn’t help with timing, and is highly assumption-dependent.