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I remember the .Com crisis when experts were saying the market was returning to 'business fundamentals' to evaluate stock. Looking at this question, I was wondering what those are and whether some lessons have been/or can be learned.
This is of course related to this question.
From http://financial-dictionary.thefreedictionary.com/Business+Fundamentals
The facts that affect a company's underlying value. Examples of business fundamentals include debt, cash flow, supply of and demand for the company's products, and so forth. For instance, if a company does not have a sufficient supply of products, it will fail. Likewise, demand for the product must remain at a certain level in order for it to be successful. Strong business fundamentals are considered essential for long-term success and stability. See also: Value Investing, Fundamental Analysis.
For a stock the basic fundamentals are the second column of numbers you see on the google finance summary page, P/E ratio, div/yeild, EPS, shares, beta. For the company itself it's generally the stuff on the 'financials' link (e.g. things in the quarterly and annual report, debt, liabilities, assets, earnings, profit etc.
Fundamentals are used to analyze the business itself (compared to "technicals" which relate to the stock's price).
This may include revenue, profitability, debt, growth, and a handful of other factors.
Broadly speaking, the goal of fundamental analysis is to determine the true value of a company. This type of value is subjective and there is no universal calculation.
When people talk about a stock's fundamental's "catching up" or a market returning to fundamentals, they are often referring to stocks with prices that cannot be justified.
For example, assume a company is super hot and everyone expects the business to experience rapid growth. Everyone starts buying and drives the stock price up much higher than it should be. Eventually, the stock may get a reality check and return to a price that can be justified by its fundamentals.
While there is no universal calculation for value, investors can generally agree when a stock is grossly overvalued or undervalued. For example, investors may debate about whether Apple's stock is worth $100 or $300 but most would agree that $5 is too low and $2,000 is too high. These perspectives are rooted in fundamental analysis, which helps investors better determine the value of a company.
