Fundamental analysis (FA) is a method of assessing an asset’s value based on economic and financial indicators. Unlike technical analysis, which focuses on charts and historical prices, FA helps determine whether an asset has real value and growth potential.

Key Indicators of Fundamental Analysis

Fundamental analysis allows investors to evaluate the “true” value of assets—whether company stocks or digital tokens. The key indicators used in this process include:

• P/E Ratio (Price-to-Earnings): Shows how much investors are willing to pay for each dollar of a company’s profit. A high ratio indicates growth expectations, while a low one may suggest the stock is undervalued or the company is facing difficulties.

• EPS (Earnings Per Share): Reflects how much profit is allocated to each share. This helps assess the company’s profitability and income-generating capacity.

• Revenue: The total income a company earns from its core operations. Consistent revenue growth indicates strong market demand and a stable position in the industry.

• D/E Ratio (Debt-to-Equity): Measures the proportion of borrowed funds to shareholders’ equity. A high ratio means the company relies heavily on borrowed capital, which may pose higher risks for investors.
 

How Fundamental Analysis Is Used Across Markets

Fundamental analysis is widely used both in traditional stock markets and in the cryptocurrency sector. In stock markets, investors analyze financial statements, assess profitability, debt levels, and other metrics. In the crypto space—where conventional financial reporting is often absent—investors focus on factors like the project’s technology, development team, market capitalization, trading volume, and community engagement.
 

Getting Started with Fundamental Analysis

To begin using fundamental analysis, follow these steps:

1. Study available information sources: Financial statements, analyst reviews, and industry news.

2. Evaluate key metrics: Such as P/E, EPS, revenue, and D/E, depending on the asset class.

3. Compare similar assets: This helps identify whether an asset is undervalued or overvalued.

4. Consider macroeconomic factors: Economic trends, interest rates, and inflation can significantly affect asset value.
 

Fundamental analysis is a powerful tool for investors seeking to make informed decisions, reduce risk, and improve investment outcomes. Regular use of FA leads to a deeper understanding of the market and a more strategic approach to investing.