Digging through annual reports and quarterly filings to analyze the fundamentals of a company is time consuming and rather boring. Because of this, retail investors often skip it, preferring to trade on tips from dubious sources such as their broker, neighbors in the next cubicle, or the internet. Analyzing fundamentals provides an edge to those who put in the effort.

A key to profiting in the market is knowing when to enter and, more importantly, exit positions. Buying low, when a company is trading at a discount to fair value, and selling high, when a company is trading at a premium to fair value, is much easier when fair value is known. Analyzing the fundamentals of a business is a way to determine the fair value of a company.

Financial reports only provide a picture of past trends and the current status of companies. However, based on those trends and macro economic assumptions, projections can be made that predict future company worth.