What is Fundamental Analysis? A Basic Guide
Written by Pradnya Surana
3 min read | Updated on December 04, 2025, 12:38 IST
Be it a trader, a seasoned investor or just a beginner, a common question in the world of stock market trading is, ‘What should I buy?’ This is where ‘fundamental analysis’ kicks in to find whether the stock is worth buying at the given price and what growth potential it holds. It also guides us to see if the stock bought is worth holding or should be sold.
What is Fundamental Analysis?
Fundamental analysis is a way to figure out the real value of a company or stock by looking at how healthy and strong it is. Investors use it to decide if a stock is cheap, expensive or priced fairly.
Its logic and mathematics are at play, which prevents stock market investment from becoming a gamble.
What Does it Examine?
Fundamental analysis looks at everything that affects a company's value. This includes financial statements, management quality, competitive advantages, industry conditions and economic factors.
The goal is to find out what the company is actually worth, is the current share value of share a fair value and what growth potential the stock has. If the company's fundamentals and growth prospects are strong and its value is higher than the current share price, the stock might be undervalued and worth buying. If it's lower, the current stock price might be higher than its worth, meaning not worth buying.
How to Perform Fundamental Analysis
Look at the numbers (Quantitative)
- How much money does it make?
- How much debt does it have?
- Are profits growing?
- Ratios like P/E (price vs earnings) help compare with others.
Use financial statements like the balance sheet, income statement and cash flow statement to arrive at your answers. You can easily find these statements on company websites, brokers' research reports or financial websites. Just Google it!
Look at the company itself (Qualitative)
- What does the company do?
- Who runs it? Are they good?
- Does it have strong products or a brand?
- Is it better than competitors?
You can find qualitative information about a company from its website, annual reports, investor presentations and news articles, which explain what the company does. For leadership and people running the show, check the company’s website, where you will find management profiles. To know its positioning in the market, read industry reports, analyst insights and market research to see its brand value and how it compares to competitors
Decide if it’s worth buying
- If the stock price is lower than its real value, it might be a good buy.
- If it’s higher than its real value, it might be too expensive.
Whether to Hold or Sell?
Apart from buying and selling, fundamental analysis will also help you decide if the purchased stock should be sold or you must hold it.
When to Hold
If you have bought a company’s shares and if its price is dropping, then you might want to consider selling. However, suppose a company's fundamentals remain strong. In that case, if profits are growing, debt is managed well, it still has the competitive edge in the market due to certain factors, then don’t become nervous due to a price drop. It may be just some noise and the share might be worth holding for its future potential.
When to Sell
Consider selling if fundamentals deteriorate. Even if the share price has not yet declined. It might be soon. Reducing profits, rising debt, losing competitive advantage, management scandals or the stock becoming highly overvalued compared to its true worth, all of these signals to sell the stock.
Review your holdings regularly, perhaps quarterly, to make rational decisions rather than emotional ones.
Final Thoughts
The beauty of fundamental analysis is that it turns investing from gambling into logical decision-making. You are not buying in the hope that prices will go up, but buying because you understand the company and you believe that it will deliver. It also gives you a guideline to manage your entire portfolio. What to buy, what to hold and what to sell.
About Author
Pradnya Surana
Sub-Editor
is an engineering and management graduate with 12 years of experience in India’s leading banks. With a natural flair for writing and a passion for all things finance, she reinvented herself as a financial writer. Her work reflects her ability to view the industry from both sides of the table, the financial service provider and the consumer. Experience in fast paced consumer facing roles adds depth, clarity and relevance to her writing.
Read more from Upstox
Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.