InvestorQ : So, what is the actually process of fundamental analysis?
Swati Naik made post

So, what is the actually process of fundamental analysis?

diksha shah answered.
3 years ago
Evaluating a company and its prospects may appear to be too generic and broad-based. We need to understand Fundamental Analysis in a more operational and practical format. After all you need to understand what really works when you evaluate companies. Why do some companies do well while some companies do not do well? Why does an airline like Indigo make profits while Jet Airways makes losses? Why private banks are profitable but then why are public sector banks in such huge losses. How did TCS create wealth for shareholders when another software company called Satyam fold up?
Fundamental analysis is the process of identifying the intrinsic value of a stock; or finding out how much a stock is actually worth. That process is also known as valuation. That is the ultimate aim of fundamental analysis; to arrive at an intrinsic valuation of the stock. How much is the stock actually worth? Why do we focus so much on the worth of the stock? If the market price of the stock is substantially below the intrinsic value then the stock is considered to be underpriced and a fundamental analyst will recommend buying the stock. On the other hand, if the market price is substantially above the intrinsic value, then the stock is considered overpriced and the analyst will recommend selling the stock. This positive gap between the fundamental valuation and the market price is also called the margin of safety and gives an investor room to invest in the stock and hope for good profits in the stock over time.