• Stock analysts attempt to predict a company's future stock price.business charts with buy image by Andrew Brown from Fotolia.com
  
  Stock analysts use a company's past performance to predict the future price of the company's stock. Fundamental analysts use a company's intrinsic value as revealed by its financial data to predict whether its stock will rise in the long term. Technical analysts use a stock's past market price performance to predict whether the stock will go up in the short term. You, as an investor, can choose which school to heed in selecting your stocks.
  
  

Fundamental Theory

• Fundamental analysts assert that if a company's revenues are growing, if it is showing a profit, paying its debts, is well-managed and has a strong market position vs. its competitors, then its fundamental intrinsic value is high and its stock is a good investment, says the FinPipe.com website.
  
  

'Markets Err'

• Fundamental analysts believe the market can be wrong in the short term and undervalue a stock. But they assert the market will correct that error in the long term, meaning the stock price will go up, says FinPipe.com. They attempt to find undervalued stocks by comparing a company's intrinsic value, as revealed through its financial reports and other business data, against its stock price.
  
  

Technical Theory

• Technical analysts believe you can predict the price of a stock in the near future by studying its past market price activity. They make no attempt to assess the company's intrinsic value. Instead, says the EcPulse.com website, technical analysts review a stock's past price data collected over time in hopes of discovering predictive price trends and patterns.
  
  

Market 'Never Wrong'

• Technical analysts, says EcPulse.com, believe a stock's market price always reflects everything known or speculated about the company. They also believe stock prices move in trends, so once a trend has been established, prices in the near future are more likely to follow the trend than go against it. And they believe price movement patterns tend to repeat whenever similar market conditions arise.
  
  

Why This Matters

• Technical analysis tends to be used mostly by traders who are focused on the short term--hours, days and weeks, says the MotleyFool.com financial website. Successful traders work full time at trading stocks. An amateur who trades part time is more likely to lose money than make it with this method. An individual with minimal time to devote to managing his investments would be better off with fundamental analysis, MotleyFool.com says, because this approach looks for stocks that are worth buying as long-term investments over spans of months and years.