What is the primary goal of fundamental analysis in investing?

The primary goal of fundamental analysis in investing is to determine the intrinsic value of a security. This approach involves evaluating a company's financial health, including its earnings, dividends, assets, and overall financial position, along with external factors such as industry conditions and macroeconomic influences. By analyzing these factors, investors aim to assess whether a security is undervalued or overvalued relative to its current market price.

This intrinsic value serves as a benchmark for making informed investment decisions. If the calculated intrinsic value is higher than the current market price, it may suggest that the security is undervalued and could be a good buying opportunity. Conversely, if it is lower, the security may be overvalued, indicating a potential sell signal.

Understanding fundamental analysis is essential for long-term investors who focus on the underlying value of a company rather than on short-term price movements or market trends. This focus on intrinsic value differentiates fundamental analysis from other approaches, such as technical analysis, which is concerned more with price action and market sentiment.