[ankitgokani]

well Fundamentals are basics of the company like shares are traded at market price but fundamental analysis finds out its intrinsic value of its shares and buying or selling the stock based on that information ROI Cash flow are some of the things use to identify comapnies fundamentals

a nice example i came across
Think of the stock market as a shopping mall: stocks are the items for sale in the retail outlets. Technical analysts will ignore the goods for sale. Instead, they will keep an eye on the crowds as a guide for what to buy. If they notice shoppers congregating inside a computer shop, our technical analysts will try to buy as many PCs as they can, betting that the growing demand will push PC prices higher.

Fundamental analysts have a more staid approach. Their sights are set solely on the products in the mall. Shoppers are dismissed as an unreliable, emotional herd with no inkling of the real value of the goods for sale. Our fundamental analysts move slowly through the stores seeking the best deals. Once the crowd moves on from the PCs, they will take a closer look at the ones that were passed over.

Fundamental analysts might take a stab at determining the scrap value of the PC stripped down to its hard disk, memory cards, monitor and keyboard. In the stock market, this is akin to calculating the book value or liquidation price of a company.

They will also take a very close look at the quality of the PC. Is it going to last, or will it break down within a year? The fundamental analysts will pore over the specifications, scrutinize the manufacturer's warranty and consult consumer reports. Similarly, equity analysts check a company's balance sheet for financial stability.

Then, the fundamental analysts might try to understand the performance of the PC in terms of, say, processing power, memory or image resolution. These are like the forecast earnings and dividends identified from a company's income statement.

Finally, the fundamental analysts will put together all the data and come up with an 'intrinsic value' or value independent of the current sale price. If the sale price is less than the calculated intrinsic value, the fundamentalists will buy it. If not, they will either sell the PCs they already own or wait for prices to fall before buying another one.