Fundamental analysis is trying to determine the intrinsic value of a financial instrument. Fundamental analysis assuming that, if the price of financial instrument is less than intrinsic value, price should increase, if the price of financial instrument is more than intrinsic value, price should decrease.

Fundamental analysis assumes that information is accurate and the participants are acting rationally. In real world due to information manipulation and participants over reaction, Fundamental analysis faces a lot of challenges specially in short term view. Over the long term view is more accepted by the market participants, that the price would move as indicated by the intrinsic value of a particular financial market.

As part of the decision-making process, Fundamental analysis will use primarily Valuation versus Price.

Fundamental analysis tells us what should happen to the price of a financial market, based on valuation.

As opposed to Fundamental analysis, other type of analysis is known as Technical analysis.