Frequently Asked Questions

• What is the difference bꦿetween qualitative and quantitative fundament♏al analysis?

  Quantitative fundamental analysis analyzes ﷽an investment according to easily measured factors, such as the earnings or assets of the company that issued a stock. Qualitative analysis looks at harder to measure factors such as the quality of a company’s management or the strength of its brand. There is not a hard line between the two and some factors can fall into both categories.

  Learn More: Qualitative Analysis: What Makes A Company Great?
• What is the difference betwe🔯en fundamental analysis and technical analysis?

  Fundamental analysis looks to✃ see whether an investment is overvalued or undervalued based on underlying economic conditionsꦆ, as well as the finances of the company or other organization that issued a stock or bond. Technical analysis instead looks at patterns in the price of an investment to predict future movements in that investment’s price.

  Learn More: Is it better t𝓰o use fundamental analysis, technical analysis, or quantitative analysis to꧑ evaluate long-term investments?
• Why do investors read financ🏅ial statements when d🏅oing fundamental analysis?

  Financial statements contain many of the key metrics that help investors determine if a company is unꦍdervalued or overpriced. Financial statements have a company’s level of profitability, how much it holds in diff♔erent types of assets, as well as how fast its sales and profits have grown over time. All of these figures are core parts of determining if a company is properly valued.

  Learn More: How Do I Read and Analyze an Income Statement?
• What is a good PE ratio for a stock?

  There is no one answer to this question as different companies will naturally have different PE ratios. For example, mature companies in def𓆉ensive stock sectors generally have low PE ratios, while early stage companies or companies in fast-growing sectors often have very high PE ratios. To make the most of PE ratio as a metric of company value, make sure to compare PE ratios to similar companies in similar sectors, as well as to the same company at different periods in the past to get better comparisons.

  Learn More: Using the Price-to-Earnings Ratio and PEG to❀ Assess a Stock