**Definition**  

Fundamental analysis is a method used by stock analysts to evaluate a stock's intrinsic value by examining key economic, financial, and business factors. It involves assessing investment worthiness, determining a reasonable price range, and providing investment recommendations based on principles of economics, finance, and investment theory.  

**Two Core Assumptions of Fundamental Analysis:**  

1. A stock’s value determines its price.  

2. Stock prices fluctuate around their intrinsic value.  

This approach is valid only when these assumptions hold. Short-term trading strategies can be categorized into sentiment-driven speculation and value-driven speculation, with the latter based on anticipated changes in an industry or company’s future value.  

**Three Key Components of Fundamental Analysis:**  

#### **1. Macroeconomic Analysis**  

- **Leading Indicators**: Interest rates (inverse indicator), money supply, consumer expectations.  

- **Coincident Indicators**: Personal income, retail sales, GDP.  

- **Lagging Indicators**: Unemployment rate, inventory levels, outstanding bank loans.  

Macroeconomic trends influence broad market indices like the Shanghai Composite, Shenzhen Component, and ChiNext Index.  

#### **2. Industry and Regional Analysis**  

- **Industry Analysis**: Examines market segments, industry life cycles, and performance impacts on stock prices.  

- **Regional Analysis**: Assesses local economic factors affecting stocks.  

Examples: Semiconductor ETFs, AI ETFs, CSI Liquor, CSI Healthcare, Hangzhou Asian Games sector.  

#### **3. Company Analysis**  

Focuses on competitive strength, profitability, management efficiency, growth potential, financial health, earnings, and risks to forecast stock value and trends.  

**Six Primary Valuation Methods:**  

1. Price-to-Earnings (P/E)  

2. Earnings Before Interest and Taxes (EBIT)  

3. Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)  

4. Price-to-Book (P/B)  

5. Price-to-Sales (P/S)  

6. Price/Earnings-to-Growth (PEG)  

These methods compare a company’s valuation to peers, identifying over/undervaluation. Each has limitations, requiring context-aware application.