Fundamentals analysis is a school of thought that is used when attempting to predict future trends in the stock market. The other school of thought is technical analysis.
Fundamentals analysis says that the best way to predict the future trends of a stock is to carefully understand the fundamental financial figures of the underlying company. For example, analysis of cashflow, examination of recent dividends and projection of future dividends. These can all be combined to calculate a theoretical value for the company. If the current stock price is lower than that indicated by this calculation, a trader who uses fundamentals analysis techniques would buy this stock. This technique is more likely to predict the dividend then the change in value of stock, since that is dependant on other people recognizing the same thing as the trader. Depending on the v-trend statistic for the stock it is more or less likely that the value will change in the way the trader believes the dividends will change.
The objectives of the analysis may be to calculate credit risk, to evaluate management and make internal business decisions, or to determine the value of a company's stock and its probable future.
Fundamental analysts believe that a business' fair value will eventually be reflected by the market.
Fundamentalanalysis lets them find 'good' companies, so they lower their risk and probability of wipe-out.
Feeds |
Contact