Fundamental Analysis in Stock-Picking

You may be asking yourself why stock-picking is so important. The answer is simple: wealth. If you become a good stock-picker, you can increase your personal wealth exponentially.

Let's start by delving into one of the most basic and crucial aspects of stock-picking: fundamental analysis. It is often a great starting point to picking good companies.

The goal of analyzing a company's fundamentals is to find a stock's intrinsic value. If the intrinsic value is more than the current share price, your analysis is showing that the stock is worth more than its price and that it makes sense to buy the stock.

The premise behind finding intrinsic value is that a company is worth the sum of its discounted cash flows. In plain English, this means that a company is worth all of its future profits added together. And these future profits must be discounted to account for the time value of money, that is, the force by which the $1 you receive in a year's time is worth less than $1 you receive today.

In general, fundamental is thought of as a long-term strategy, while technical is used more for short-term strategies.

Source: Investopedia

For more about stock trading, Digital Nomad Here.