What Is Fundamental Analysis, and How Is a Stock's Intrinsic Value Estimated?

The board quotes a price every second, but that number is not the same as the stock's real worth. In this lesson we learn what intrinsic value is, how fundamental analysis works, and why it matters. Market price and real value are not always the same, and that gap creates opportunity or risk for investors. Fundamental analysis estimates a company's real value from its profit, its assets and its debts, not from a chart. The market price is a definite number on the board, while intrinsic value is only an estimate from fundamentals. The work has four steps: read the reports, judge profit quality, estimate the value, and compare it with the price. Companies come in two families: earnings-based, valued by their profit, and asset-based, valued by their holdings. An earnings company is measured with earnings per share and the price-to-earnings ratio the market will pay. Suppose earnings per share is five hundred tomans and the industry ratio is eight; the value is about four thousand. But an asset company, such as an investment firm, is measured by its net asset value, not just by profit. If net asset value per share is one thousand tomans and the market pays seven hundred, that is thirty percent below. All of this data is free on Codal: financial statements, monthly reports, interpretive reports and assembly decisions. The first mistake is treating intrinsic value as fixed, when it changes as your assumptions change. The second mistake is measuring every company with one tool; the tool must match the company type. So the key point is this: first identify the company type, then choose the right valuation tool. Now you have the answer: value differs from price. Full lesson on Sahmino.com; save this lesson to review later.