Which type of analysis focuses on a company's financial statements?

Fundamental analysis is the type of analysis that centers on evaluating a company's financial statements to assess its overall financial health and intrinsic value. This approach involves examining various elements of financial statements, such as the income statement, balance sheet, and cash flow statement. Analysts look at key performance indicators, revenue growth, profitability margins, and debt levels to understand how well a company is performing and to forecast future performance.

The underlying principle of fundamental analysis is that a company's stock price may not always reflect its true value at any given moment, and by studying its financial metrics, investors aim to identify under- or over-valued stocks. This analysis is essential for making informed investment decisions based on the financial viability of the company rather than market trends or investor sentiment.

In contrast, technical analysis focuses on price movements and trading volumes, using charts and indicators to predict future price movements without considering the company’s fundamentals. Quantitative analysis employs mathematical and statistical models to evaluate investment opportunities, whereas sentiment analysis evaluates the mood or sentiment of the market or investors toward a particular security or market, often through social media or news. Each of these approaches serves different purposes in the investment decision-making process, but fundamental analysis is distinctly concerned with financial performance as detailed in a company's financial statements.