Fundamental methods analyze the health of individual companies by examining sales & earnings growth, cash flow, profit margin, level of outstanding debt, return on equity, among other metrics. In general, fundamental analysis tells us how healthy a company is. However, it’s difficult to make entry and exit decisions using fundamental analysis. Just because a company is healthy doesn’t necessarily mean that the stock will increase in value, at least for the short to intermediate-term. Typically, technical analysis is used to determine when to enter and exit a stock.
What is fundamental analysis?
Fundamental methods analyze the health of individual companies by examining sales & earnings growth, cash flow, profit margin, level of outstanding debt, return on equity, among other metrics. In general, fundamental analysis tells us how healthy a company is. However, it’s difficult to make entry and exit decisions using fundamental analysis. Just because a company is healthy doesn’t necessarily mean that the stock will increase in value, at least for the short to intermediate-term. Typically, technical analysis is used to determine when to enter and exit a stock.