Fundamental analysis is based on the idea that the market cannot be depended upon to accurately price a stock. Fundamental analysis looks at external factors, such as earnings reports, economic news releases, and looks to see how these factors will affect prices in the future in order for the investor to earn a profit. While technical analysis is more associated with short term traders, who are constantly looking for patterns to enter and exit trades, fundamental analysis is appealing to investors who hold on to stocks long term.
Many fundamental analysis investors believe in "value investing", essentially looking for stocks priced at a discount whose intrinsic value is calculated to be higher than its market price. Fundamental analysts would hence place long term trades on these stocks.
Determining the intrinsic value of a stock is the chief mission of a fundamental analyst. He will look at a company’s profile, seeing when its latest earnings reports were released, what types of news is expected from the company, and accordingly analyze if the market has correctly priced in all this information into the stock. Successful fundamental analysts do not shy away from financial statements. Analysts look at a company’s revenue, expenses, assets, and liabilities and all other relevant financial aspects of a company. Taking all this data into account, the analyst attempts to understand what the true value of the stock should be.
One can get started with Fundamental Analysis by researching how stock prices are determined by a market. By understanding how to interpret earning reports, financial statements, balance sheets, cash flow statements, etc- you would understand how stock prices move in reaction to these pieces of information. That way, the next time you feel that a stock is under-priced based on what you know about the stock, you can invest in the stock more confidently.