Steps involved in Fundamental Analysis

Fundamental analysis is the key element of investing. In fact, all types of investing comprise studying some fundamentals. The subject of fundamental analysis is also very vast. However, the most important part of fundamental analysis involves delving into the financial statements. This involves looking at revenue, expenses, assets, liabilities and all the other financial aspects of a company. Analysts look at these information to gain an insight into a company’s future performance. As a result, he brings up an intrinsic value to give the recommendation to buy or sell a particular stock. Fundamental analysis consists of a systematic series of steps to examine the investment environment of a company and then identify opportunities. Some of these are:

  • Macroeconomic analysis – involves analysing capital flows, interest rate cycles, currencies, commodities, indices etc.
  • Industry analysis – involves the analysis of industry and the companies that area part of the sector
  • Situational analysis of a company
  • Financial analysis of the company
  • Valuation

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