Even some technicians will agree to that. A good understanding can help investors avoid companies that are prone to shortfalls and identify those that continue to deliver. In addition to understanding the business, fundamental analysis allows investors to develop an understanding of the key value drivers and companies within an industry. A stock's price is heavily influenced by its industry group. By understanding a company's business, investors can better position themselves to categorize stocks within their relevant industry group.
Business can change rapidly and with it the revenue mix of a company.
Some prominent old economy companies are moving into new economy businesses. Enron, a natural gas transmission company, is now making a market to buy and sell bandwidth. Some companies that are part of the new economy are really old economy companies in disguise. This happened to many of the pure internet retailers, which were not really internet companies, but plain retailers. Knowing a company's business and being able to place it in a group can make a huge difference in relative valuations.