Fundamental Analysis
Capital Ingenuity can help you understand the complexities of fundamental analysis.

Fundamental analysis is the analysis of all factors of company that can affect its business. There are two aspects of fundamental analysis: quantitative analysis and qualitative analysis. Neither of the two aspects of fundamental analysis is superior to the other. They are, in fact, complementary and are both required to get the most complete picture possible before investing in a company's stocks or bonds.

Quantitative analysis involves looking at the financial numbers of a company. Most of this information can be found from a company's income statement, cash flow statement, and balance sheet. Often, practitioners of fundamental analysis will look at some of the more important numbers as ratios that can be compared to a company's competitors.

Qualitative analysis involves looking at other factors that can affect a company, but are not quantifiable in numbers. An example of qualitative analysis would be researching the quality of a company’s management. If the CEO of Company ABC came from Company XYZ and company XYZ experienced tremendous success while working there, that may influence an investor’s decision to invest in the stock of Company ABC.

The ultimate goal of fundamental analysis is to determine the "intrinsic value" of a company's securities and to make a determination as to whether an investment is warranted. Intrinsic value is the value an investor believes a particular security is truly worth based on all available information. Often, the intrinsic value of a security is more than the market value of the security. The market value is what the market is currently willing to pay for a particular security. Using fundamental analysis, an investor may be able to identify opportunities to buy securities, such as stocks or bonds, for less than they are worth.