Where technical analysis reads the chart, fundamental analysis reads the business: what a company earns, what it owns and owes, and how cash actually flows. Three financial statements tell that story, and simple ratios like the P/E turn them into a quick read on value.
Income statement
Revenue minus costs equals profit (earnings). It answers: is the company actually making money?
Balance sheet
A snapshot of what the company owns (assets) versus what it owes (liabilities), with the difference being equity.
Cash flow statement
Tracks real cash in and out — harder to fudge than earnings, and often the truest health check.
The P/E ratio
Share price ÷ earnings per share: a fast gauge of how expensive a stock is relative to its profits.
When do fundamentals matter? (market efficiency)
The more widely followed and liquid a market is, the faster public information is already reflected in the price — the idea of market efficiency. That's why fundamentals reward the long-term owner most: over years, price tends to track the value a business creates, but over days it's driven by sentiment and the latest catalyst. Knowing which game you're playing — and how efficient your market is — tells you how much weight to put on fundamentals versus the chart.