when performing fundamental analysis you study the company s revenue growth profitability and competitive advantages within its industry you also assess macroeconomic factors such as the overall state of the economy and the demand for the company s products or services it also takes into account the effectiveness of the company s management team a skilled and experienced leadership team can navigate challenges and seize opportunities driving the company s growth and increasing its value 
this approach to the market often allows you to see behind investor sentiment and company marketing to determine whether the company has the potential for long term success with fundamental analysis you can then gauge if the security s market price is over or undervalued fundamental analysis typically starts by analyzing a company s financial statements including the income statement balance sheet and statement of cash flows the information in these materials can be used to calculate and assess a company s financial health and intrinsic value key ratios derived from these financial statements include the price to earnings p e ratio earnings per share eps return on equity roe and debt to equity d e ratio among others fundamental analysts use measures like these to determine whether a stock is undervalued or overvalued relative to its market price and competitors 1in addition fundamental analysis frequently involves looking at gross domestic product inflation unemployment rates industry or sector trends and the company s competition fundamental analysis thus takes how a company should perform not just in the market but as a producer of goods and services this requires looking at the overall economy sector performance and the company s position within the industry to estimate its value and forecast future performance this approach not only considers economic and financial data but also often includes reviewing its business model management effectiveness brand awareness and potential for growth and profitability ultimately fundamental analysis aims to give you a number a value for the company you can use when buying holding or selling stocks it requires a comprehensive understanding of financial statements and a strategic view of how external factors could impact the company s future earnings and market position 