Fundamental analysis is the use of real data, whether quantitative or qualitative, to attempt to assess the intrinsic value of a security. Fundamental analysis is most commonly associated with "value investors" such as Warren Buffett, and is predicated on the notion that whereas in the short run markets may misprice a security in relation to its intrinsic value, in the long run the price will tend to move in the direction of this "true" value.

Fundamental analysis is often placed in diametric opposition to technical analysis, which in its purest form asserts that the "true" value of a security is whatever the market is willing to pay, sees business fundamentals as irrelevant, and focuses exclusively on reading past chart patterns in an attempt to predict future price movements. In reality, however, almost all successful investors use some combination of fundamental and technical analysis.

Some common indicators used in fundamental analysis include P-ratios such as the price to earnings (P/E) ratio, the price to book value (P/B) ratio, and PEG (price/earnings to growth ratio), as well as various measures of return such as return on equity (ROE), return on investment (ROI), return on assets (ROA), return on capital (ROC), and return on invested capital (ROIC).

Although of course Warren Buffett would tell you that there is simply no substitute for reading financial statements such as quarterly and annual reports.

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