Chapter 1 · Day 1 — What fundamental analysis is
Intrinsic value and market price
The one idea the whole course rests on: what a business is worth, and what it is quoted at, are different numbers.
Fundamental analysis asks a single question: what is this business worth? The market answers a different question every second — what will someone pay right now. The gap between those two answers is where the work lives.
The order a company is analysed in
The three cases
| Relationship | Reading | What it is not |
|---|---|---|
| Intrinsic value > market price | Possibly undervalued | Not a buy signal |
| Intrinsic value ≈ market price | Fairly valued | Not a reason to avoid it |
| Intrinsic value < market price | Possibly overvalued | Not a sell signal |
Four ways people invest, and what each one is really buying
| Style | Buys | Main risk |
|---|---|---|
| Value | A price below estimated worth | The discount was deserved |
| Growth | Future earnings, paid for today | The growth does not arrive |
| Quality | A durable, high-return business | Overpaying for a good company |
| Income / dividend | A cash stream | The dividend is cut |
These are not tribes. A good analysis of a NEPSE company usually touches all four: is it growing, is it profitable, is the balance sheet sound, and can it pay?
Investment against speculation
Benjamin Graham's distinction still works: an investment operation promises safety of principal and an adequate return after analysis. Anything else is speculation. Neither is wrong — but knowing which one you are doing decides how much you should size the position and how you should react when it falls.
Fundamental, technical, sentiment
| Approach | Input | Answers |
|---|---|---|
| Fundamental | Accounts, business, sector | What is it worth? |
| Technical | Price and volume | What is price doing? |
| Sentiment | Positioning, news, mood | What does the crowd feel? |
They answer different questions and are not rivals. This course only covers the first, and is honest that the first tells you nothing about timing.
Common mistakes on day one
- Treating a low P/E as 'cheap' before knowing why it is low.
- Calculating a fair value and then hunting for facts that support it.
- Comparing a bank's ratios with a hydropower company's.
- Reading one ratio in isolation, with no history, no peer and no sector context.
Saved in this browser only — there is no account to create. Clearing your browser data clears your progress.