Fundamental analysis is good for long-term investments based on very long-term trends. No votes so far! While the individual company is still important, its industry group is likely to exert just as much, or more, influence on the stock price. The idea is to look at each of these aspects in order to get an idea of the possible future performance of the company. Some companies were considered bargains at 30 times revenues. However, even on a worst-case valuation, most models are almost always bullish, the only question is how much so. Once the industry group is chosen, an investor would need to narrow the list of companies before proceeding to a more detailed analysis. Fundamental analysts are generally aware of this and use sensitivity analysis to present a base-case valuation, an average-case valuation, and a worst-case valuation. Fundamental analysis of a company is done to predict the future growth of a business. For example, a telecom operator (Verizon) would be compared to another telecom operator (SBC Corp), not to an oil company (ChevronTexaco). This is a wikifinancepedia.com editiorial team. Characteristics and Mindset of a Great Investor. The rate of reaction to the publication of data and the emergence of the phenomenon called discount future information is a fact of the market. Can a profit be made? Questions like, what are the revenues of the company are? This methodology assumes that a company will sell at a specific multiple of its earnings, revenues or growth. Of course, these questions are difficult to answer and there are literally hundreds of others that we can raise concerning the situation of a company. How long have they worked together? It’s made to deepen the financial statements of a company. Many economists link economic expansion and contraction to the level of interest rates. Also known as quantitative analysis, it analyzes the environment to income, expenses, assets, liabilities and all other financial aspects of a company. In order to use StockCharts.com successfully, you must enable JavaScript in your browser.Click Here to learn how to enable JavaScript. The list can seem quite long and intimidating. Only buy-side analysts tend to venture past the company statistics. Over the course of the analysis process, an understanding will develop of which companies stand out as potential leaders and innovators. The majority of the information that goes into the analysis comes from the company itself. The chart below shows that relative performance of 5 sectors over a 7-month timeframe. Buy-side analysts work for mutual funds and money managers. Investors are usually interested in finding the leaders and the innovators within a group. Is there really a profit? The final step of the fundamental analysis process is to synthesize all data, analysis, and understanding into actual picks. In addition to understanding the business, fundamental analysis allows investors to develop an understanding of the key value drivers and companies within an industry. As with most analysis, the goal is to derive a forecast and profit from future price movements. Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, liabilities, and earnings); health; and competitors and markets.