Fundamental Analysis
The study of a company's financial statements, industry and economics in order to estimate what its shares are worth.
How it is identified
Test: the conclusion rests on the issuer's business economics rather than on the behaviour of its price
Unit
qualitative
In depth
Fundamental analysis asks what a business is worth and compares that with what it costs, which is a different question from technical analysis's what the price is doing. Its output is a range rather than a number, because every valuation rests on assumptions about growth, margins and discount rates that cannot be known precisely. The discipline is less about arriving at a figure than about knowing which assumptions the figure depends on and how wrong they can be before the conclusion flips. Its weakness is timing: a correctly identified mispricing can persist for years, which is why it pairs poorly with borrowed money.
Worked example
An analyst concludes a business is worth ₹75 to ₹95 a share against a market price of ₹60. The conclusion is that the price is below the range, not that ₹85 is the target — and nothing in the analysis says when, or whether, the gap closes.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Fundamental Analysis” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.