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What is a fundamental analysis and its characteristics?

People are increasingly investing in the stock market. This is an alternative that has attracted people as they understand it, so it is important to understand fundamental analysis.

If you intend to begin to understand the subject, you must understand the importance of doing a fundamental analysis and getting to know the companies to which you intend to be a partner.

Fundamental analysis is crucial for the investor to have essential information to make the decision to buy or sell stocks. Understanding how it works can increase the chances of income being higher, as you have the possibility to check how the company will be over time.

In this content you will understand what a fundamental analysis is, its characteristics and much more. Keep reading to understand.

What this article covers:

What is fundamental analysis?

A fundamental analysis is basically the financial study and perspectives of the company done by a fundamental analyst.

Source/Reproduction: original

This analysis aims to evaluate various investment alternatives and understand how the company is now and what the prospects are for the future, in order to know the possible long-term results.

The fundamental analysis will try to identify the perspective of financial growth in the medium and long term. In this way, the investor will know whether or not it is worth investing in the analyzed company.

How it works?

A fundamental analysis is carried out so that the investor will know what the prospects for the future of the company are. This means that he will be able to have a baseline of how the company will be in the future in a financial sense.

In this way, the chances of investing in the right company are greater for the investor and there is less risk of investing in companies with good prospects.

Characteristics and types of fundamental analysis

The fundamental analyst needs to analyze the three aspects before reaching a conclusion whether it is worth investing in a particular company. Check out what they are below.

Macroeconomic analysis

Within the fundamental analysis, macroeconomic analysis is carried out. This analysis is basically the macroeconomic study of which the company is.

This analysis is fundamental, because the environment in which the company is inserted influences its economic future and clearly also for its business. With this, it is important to make considerations of exchange rate data, GDP, interest rates, inflation indices and others.

Sector analysis

It is also important to consider that not all companies are affected in the same way. So it is important to carry out a sectorial analysis evaluating the impacts of each segment of the company.

company analysis

The analysis of the company is done through studies of the company’s financial data, such as profits, losses, investments and etc.

Advantages of using fundamental analysis

Fundamental analysis is widely used and has been increasingly accessible to those who want to invest. One of the biggest advantages of fundamental analysis is that it is very complete covering several aspects related to the company.

Before making a decision, especially when it involves investing, it is important to analyze where we are putting our money, and fundamental analysis is ideal for this.

It will provide more security to the investor who will make the decision more confidently.

Fundamental analysis indicators

Analyzing some fundamental analysis indicators, it is easier to identify which company to invest in, how much to invest and if it is really worth becoming a partner.

Fundamental analysis indicators
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Before that, it is necessary to analyze some economic indicators, they allow the investor to find better investment opportunities. It is important to analyze some important indicators:

Other indicators must also be analyzed. Some of them are as follows:

  • Governance policy;
  • Brand awareness;
  • Growth potential;
  • Ability to generate revenue.

In this way, it is possible to verify if it is worth investing in a certain company.

How is fundamental analysis done?

The fundamental analysis is made from the analysis of several factors. Most of them are based on the analyzes already covered here, such as analyzing information given by the company and checking financial perspectives.

And it can also be done according to the evaluation of the microeconomic and macroeconomic analysis of which the company is. With this, it is possible to have an idea of ​​the situation of the company and how it will be in a few years.

It is very important to consult a professional for this. This way it will be possible to know the real situation of the company and its perspectives.

balance sheet

The balance sheet is basically the presentation of rights, obligations and assets. This list involves financial investments, real estate and others. What makes the fundamental analysis more complete and giving more security to the investor.

With this text you learned what a fundamental analysis is and some criteria that are analyzed, and if you are interested in investing in a company, we recommend that you hire the service of a fundamental analyst and thus, you will avoid headaches with bad investments.

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