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Learn the stock market › Fundamental analysis: the basics › Lesson 1 of 8

What is fundamental analysis?

Short answerFundamental analysis means trying to understand a company through its business and its numbers: what it sells, what it earns, what it has borrowed and what the stock costs. In 2025 Netflix had revenue of $45.2 billion, profit of $11.0 billion and debt of $14.5 billion. The stock ended the year at $93.76.

Four numbers side by side

A stock is a small piece of a company, as the lesson on stocks explains. So fundamental analysis starts with the business, not the price. Here are four years of Netflix.

YearRevenueProfitDebtLast price of the year
202545,18310,98114,463$93.76
202439,0018,71215,583$89.13
202333,7235,40814,543$48.69
202231,6164,49214,353$29.49

Netflix. $ million, last price of the year per share.

From 2022 to 2025, revenue changed by +43%, profit by +144%, debt by +1% and the year's last price by +218%. Debt here means what the company has borrowed, not everything it owes, such as unpaid bills. The latest fiscal year ended in December 2025.

The table doesn't say whether the stock is good or bad. It raises questions.

The questions the analysis asks

  • The business. What does the company sell, to whom, and why do customers choose it?
  • Sales. Are they growing, and is that from more customers, higher prices or companies it bought?
  • Profit. How much of each sale is left, and is it ordinary profit or a one-off?
  • Debt. How much has the company borrowed, and could it pay the interest in a bad year?
  • The price. What are you paying for all this today? That is what the P/E ratio measures.

The rest of the course takes them one at a time: how a company makes money, earnings per share, EBITDA and cash flow.

Where the numbers come from

Listed companies must publish their numbers, in quarterly reports and an annual report. In the US those are the 10-Q and the 10-K. Fundamental analysis is built on them. The market reads the same numbers, which is why prices often move on earnings day.

What the analysis can't do

Every number in a report describes the past. The price also reflects what the market expects next, and that can change faster than the company does. Two people can read the same report and reach different conclusions because they guess differently about the future. The analysis can show what you are paying for, but not what the stock will do tomorrow.

Test yourself

What does fundamental analysis look at first?

How the price has moved: the Netflix stock page.