This will be the last post in the stock series! In this series, we have covered a variety of topics related to stocks and their related concepts and terminology. Below is a stock quote from Yahoo Finance. Each of the seven posts in this series has covered a different part of the quote:
Before we move on to a new series, I wanted to summarize what we have covered.
What is a Stock?
Before briefly summarizing each post, remember that stock is ownership interest in a company – if an investor owns stock in a company, they are a co-owner. The ownership interest is divided into different units called “shares” A shareholder is (typically) able to:
Vote of certain items of company business.
Vote to elect members of the board of directors.
Receive dividends, which are a portion of the company’s earnings (at the discretion of the board of directors).
Market capitalization is the total market value of a company’s shares. It is calculated by multiplying the total number of shares by the market price per share. For example, if a company has 150,000 shares outstanding and the price per share is $20, the market capitalization for the company would be $3,000,000 (150,000 * 20).
A stock’s P/E or price-to-earnings ratio a measure of how expensive the stock is relative to its earnings. To calculate a stock’s P/E ratio, you divide the price per share of a stock by the earnings per share. For example, if a stock is trading at $60/share and the earnings are $4/share, then the P/E ratio would be 15 (60 / 4 = 15).
There are different ways to describe historic and current stock prices:
Last/Current = Most recent price.
Open = First price the stock trades at during the day.
Close = Last price the stock trades at during the day.
Bid/Ask = The bid is the highest price at which buyers are willing to purchase the stock. The ask is the lowest price at which sellers are willing to sell the stock.
Day’s Range = The day’s range is the total range of prices the stock has traded at throughout the day (lowest to highest).
52 Week Range = The 52 week range is the total range of prices the stock had traded at throughout the last year (lowest to highest).
Trading volume is the number of shares that are exchanged/traded on a given day. Average volume is the average trading volume over a period of time.
Dividends are distributions of a portion of a company’s earnings. The dividend rate is the dollar amount of the dividend, whereas the dividend yield is the percentage of the dividend compared to the stock's current price. For example, a company declares a yearly dividend of $5/share and its price per share is $80. The dividend rate is $5/share and the dividend yield is 6.25% (5 / 80).
“Sell side” stock analysts are professionals who follow a company and then publish recommendations concerning the company’s stock. “Buy side” stock analysts work for investment firms and conduct research, but it will typically be kept private.
Beta is a metric that shows how the volatility of a stock compares to the volatility of a benchmark. A beta of greater than 1.0 means that a stock is more volatile than the benchmark. A beta of less than 1.0 means that a stock is less volatile than the benchmark. The beta of the benchmark is 1.0.
Earnings Per Share (EPS) And Earnings Date
We did not have a post specifically about earnings per share (EPS) and earnings date, but I wanted to include a brief description of it here, because it is include in the Yahoo Finance stock quote shown above.
As in its name, earnings per share is calculated by dividing the company’s total earnings (also called “net income” or “profit”) by the shares outstanding. The earnings date shown in the quote above is the date range when the company’s earnings from the prior quarter are expected to be reported to the public.
If you have any comments, questions, or ideas for future posts, please let me know
I hope you found this post helpful and educational. If you have any comments, questions, or ideas for future posts, please let me know. You can reach me directly via email at crawford@ulmerfinancial.com.
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