Fundamental Analysis: 3 Key Applications for Investors

Fundamental analysis is a method that is used by many different types of investors in various situations. Here are some of the uses of fundamental analysis.

1. Buy and Hold

One of the most common investment strategies utilizes a buy and hold approach. With fundamental analysis, you can determine whether you are selecting the right securities for this investment strategy. You want to make sure that the company you are investing in is solid and will be around for the long-term. Fundamental analysis can give you an indication of this information.

2. Valuing Good Companies

This type of analysis can also help you evaluate which companies are good investments and which ones are not. For example, you will be able to look at determinations such as the price-earnings ratio, price-to-sales ratio, and the debt load of a company to gauge how healthy the company actually is.

3. Value Investors

Value investors regularly utilize fundamental analysis whenever they are trying to determine which companies are undervalued in the market place. The object of value investing is to try to find companies that are trading at prices below what they should be. In order to do this, you are going to have to dig deep into financial statements to see if they are valued correctly.