Financial Jargon Buster Dictionary
This glossary is provided for information only and is not regulated by the Financial Services Authority.
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Fundamental Analysis
Analysis of share values based on factors such as sales, earnings and assets that are "fundamental" to the enterprise of the company in question. These factors are considered in light of current share prices to ascertain any mispricing of the shares.
Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis.
Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. There are several possible objectives:
- to conduct a company stock valuation and predict its probable price evolution
- to make a projection on its business performance
- to evaluate its management and make internal business decisions
- to calculate its credit risk
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