How does fundamental analysis differ from technical analysis?

Fundamental analysis is primarily concerned with evaluating a company's financial health and performance based on its financial statements, management decisions, and market conditions. It involves examining a firm's revenues, expenses, profitability, assets, liabilities, and overall economic environment to determine its intrinsic value. This approach allows investors to assess whether a stock is overvalued or undervalued relative to its true worth, guiding investment decisions based on financial metrics rather than short-term price movements.

In contrast, the other options outline different focuses. Studying market trends is more aligned with technical analysis, which looks at chart patterns and trading volume. Focusing solely on price movements pertains to the same technical analysis perspective, which emphasizes the historical prices and their patterns rather than the underlying financial health of a company. Investor sentiment is also a component of technical analysis, as it gauges the overall mood or psychology of investors affecting stock prices, which can diverge from a company's fundamental value. Thus, evaluating a company’s financial health effectively distinguishes fundamental analysis from these other types of analysis.