Fundamental Vs Technical Analysis of a stock.

Fundamental analysis and technical analysis are two distinct approaches used by investors and traders to analyze stocks and make investment decisions. Here’s a comparison between the two:

Fundamental Analysis:

1. Focus: Fundamental analysis concentrates on evaluating a company’s financial health, business model, management, industry position, and economic factors that affect its operations.

2. Data Used: It relies on financial statements (income statement, balance sheet, cash flow statement), earnings reports, company news, industry trends, and macroeconomic indicators.

3. Purpose: The primary goal is to assess the intrinsic value of a stock or security. It seeks to determine whether a stock is undervalued, overvalued, or fairly priced based on its fundamental characteristics.

4. Long-Term Perspective: It is more suited for long-term investors aiming to understand a company’s potential for growth and profitability over an extended period.

5. Examples of Tools Used: Ratios like price-to-earnings (P/E), price-to-book (P/B), dividend yield, earnings per share (EPS), and discounted cash flow (DCF) models are used in fundamental analysis.

Technical Analysis:

1. Focus: Technical analysis concentrates on studying past market data, primarily price and volume, to forecast future price movements.