Fundamental analysis is a method of determining the real or “fair market” value of a stock.
Fundamental analysts look for stocks that are currently trading at prices above or below their true value.
If the fair market value is higher than the market price, the share is considered undervalued and a buy recommendation is given.
If the fair market value is below the market price, the shares are considered overvalued and a recommendation may be made not to buy or sell the shares if they are held.
On the contrary, technical analysts prefer to study the historical price trends of stocks in order to predict short-term future trends.