Fundamentals are associated with economic health of a company, measured in terms of revenues, earnings, assets, liabilities, Return on Equity [ROEs], Return on Assets [ROAs], Return on Investments [ROIs], growth prospects and cash flows, etc. The fundamentals tell u about company. You can say Comp. is having robust fundamentals if it's growing at nice pace, generating profit, has limited debts and abundant cash.

The analysis of company's fundamentals involves getting deep into its financials, rather than day-to-day movement in its stock price. Equity researchers normally do fundamental analysis in order to calculate intrinsic value of company's share. If company's share is trading above intrinsic value or fair value, then share is overvalued. If company's share is trading below intrinsic value, then share is undervalued. However, if u watch share markets very closely, stock price of most Comp. never matches fair value. Often, day traders and investors who'd prefer short term investment options invest in those stocks, regardless of companies' long term growth prospects. However, long term investors generally prefer to invest in Comp. with robust fundamentals and ignore near-term stock price movements.

The following are various components that constitute a company's fundamentals:

Revenues: Revenues [saless] are total amount of money received by Comp. through sales of its goods and services during specific period of time. Revenues are one of most Imp. barometers of growth of Comp. as it indicates whether there is demand for their products and services.

Cash flows: Cash flows are calculated by deducting company's cash payments from cash receipts over particular period of time. Cash flows indicate liquidity position of company. However, one must pay particular attention to operating cash flows, since health of business can be most clearly seen there.

Net income: Net income, which is also called 'bottom line', is calculated by subtracting from revenue, all of company's costs, such as operating costs, interest expenses, depreciation, taxes and other expenses associated with running business.

Balance Sheet: Balance sheet is company's financial statement, which reflects its assets and liabilities. A company's fundamentals are said to be robust if its assets are significantly higher than liabilities. However, one must carefully analyze company who are reporting large intangible assets as they can have questionable liquidation value to offset any real liabilities.

Return on Assets [ROAs]: ROA is an Indicator of company's profitability, which is calculated by dividing net income for past I2 months by total average assets of company. This is one of Imp. indicators, which long-term investors consider before investing into particular share.

Although long-term investors and institutional investors consider company's fundamentals before investing, stock price of company often doesn't correspond to fundamentals - which can present enormous investment opportunities. A company's long-term growth is driven primarily by fundamentals, while company's stock price can be driven by short-term news and investor sentiment, which can be extremely volatile. Every investor must consider company's fundamentals before investing into its share if u want to gain stable returns over long term.