Fundamental analysis assumes that a security has an intrinsic value determined by the business's ability to generate cash flow, and that market price converges to it over time. The analyst's task is to estimate this value and compare it with the current price.
Work is conducted at several levels: macroeconomic conditions, industry status, the company's position within it, and financial metrics—revenue, profit, debt burden, profitability. Based on these, multiples are calculated to compare the issuer with comparable peers.
Limitations are significant. Valuation relies on forecasts, and any assumption about the future may not materialize. Financial statements reflect the past and are released with a delay. Moreover, undervaluation by multiples does not guarantee price growth: the market may maintain its assessment indefinitely.
For the Uzbek market, practical conditions apply: comparability of reporting standards, the share of securities in free circulation, and transaction availability. An accurate valuation of a security that cannot be purchased in the required volume has no practical value.