An investor will undertake a fundamental analysis to determine a company’s potential profitability based on its current financial position and external business environment.
A technique for figuring out a stock’s true or “fair market” value is fundamental analysis. Fundamental analysts look for stocks that are now trading for more or less than what they are really worth. A buy recommendation is made for the stock if the fair market value is higher than the current market price, which indicates that it is undervalued.