Fundamental analysis aims to uncover an asset’s intrinsic value or ‘real value’. This is a calculation of the value of the asset without factoring in market value or sentiment. Fundamental analysts use resources like financial statements, industry trends and market releases.
Once a trader has determined a security’s intrinsic value and considered other key indicators such as market sentiment, they can use that information to inform their investment decisions. When an investor has determined a stock may be under- or over-valued when measured by its fundamentals, this could be an indication to buy or sell. Sometimes, when a company's share price is considered to be too high, the company will choose to perform a stock split, thus reducing the value of its shares and this makes them more affordable for investors.