Fundamental Analysis of stocks – what is it?

Fundamental analysis in regard to the sharemarket is a method of assessing whether a company is a good investment using various sources such as financial statements, company announcements, disclosures and economic and industry reports.

It involves an academic approach and considers the overall economy, the industry in which the business operates and the Financial Health (see Lincoln Indicators, no affiliation) of the company. Fundamental analysis looks at both ‘quantitative’ data (eg. revenue growth, margins and financial ratios) and ‘qualitative’ data (eg. management strength, market position, patents and proprietary technology).

Using this method, the company’s valuation is based on past performance, industry trends, growth potential management and competition. Unlike the Efficient Market Theory (EMT), which says that all information is already reflected in current prices and therefore cannot be predicted, fundamental analysis believes that an intrinsic value may be derived and that investors can profit by buying ‘undervalued’ shares and, where short selling is allowed, selling ‘overvalued’ shares.  There are varying ideas on intrinsic value. See our post

Shares that are undervalued are those that have a higher intrinsic valuation compared to the current market price. Whereas, overvalue shares are those with intrinsic valuations less than the current market price. The assumption here is that in the long run, shares will move towards the intrinsic valuation or the ‘correct price’.

For more information and examples of investing lessons, as well as whether  self managed super is for you, come to a free meeting – see the up-coming seminar listed above for more details. See .


About SuperBenefitnews

Self-Managed Superannuation Service Providers in Australia. SuperBenefit will SET UP your SMSF and provide investment education for a better result. We take care of all your administration, accounting, ATO lodgement and audit of SMSFs, working with you and your advisors. If you want advice we can arrange one of our recommended advisors and accountants to meet with you, as we do not give advice, but take instruction only. Take control of your super, including property shares and other assets. Learn how to be your own advisor - make better decisions - by being mentored and coached to invest your own super wisely and strategically by qualified partners. Book to come to an event to find out more, or - Call us 0407 361 596, no obligation FREE strategy call.
This entry was posted in Investing - Stock Fundamentals, SMSF Investing. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s