At one time or another most of us have seen a stock quote. But how many times have you wondered what one of the metrics in the quote actually meant? It’s not too difficult to venture a guess as to what a 52 week high is, but even experienced investors might have a much harder time clearly explaining what market cap, forward p/e, and beta are, in their simplest terms.
We’ll hit on all the basic metrics that most online stock quoting services provide so that the next time you’re evaluating whether or not to purchase a stock you aren’t left scratching your head and wondering if you should be worried or excited about what you are seeing.
Open: The US stock markets are officially ‘open’ for trade from 9:30 AM to 4:00 PM EST Monday through Friday on most days. Open is the price of the stock at 9:30 AM on an open trading day. In between the close and open are ‘after hours’ (4:00 – 6:30 PM EST) and ‘pre-market’ (8:00 – 9:30 AM EST) trading. Trading that goes on during these times often will impact the open price.
Prior Day’s Close: The price of a stock at the close (4:00 PM EST) of the previous trading day. Note that the prior day’s closing price may not necessarily equal the next day’s open price, as there is after hours and pre-market trading in between the two.
High: The highest price that the stock has traded for during the most recent trading day.
Low: The lowest price that the stock has traded for during the most recent trading day.
Volume: The number of shares of that stock that have traded hands during the most recent trading day. This is an important metric that measures how easily (liquidity) a stock is traded. If volume is high, it is easy to trade shares. If volume is very low for a stock, it may be much harder to buy and sell a specific amount of shares at exactly the price you would like.
Avg. Volume: This is a measure of volume over an extended time period – usually one year. This metric is used to compare to volume in a given day. If volume is relatively high versus the average volume, it may indicate noteworthy news regarding the company that would result in a higher level of trading.
Market Cap (Capitalization): A dollar amount that equals the share price multiplied by the number of outstanding shares. Relatively, stocks are considered large cap if they have a market cap of $10-200 billion, mid if their market cap is between $2-10 billion, and small if the cap is between $500 million and $2 billion.
52 Week High: The highest price that the stock has traded for over the last 52 weeks (1 year).
52 Week Low: The lowest price that the stock has traded for over the last 52 weeks (1 year).
P/E: P/E (Price-to-earnings ratio) is a mathematical computation that takes a stock’s current stock price and divides it by its previous annual earnings per share. A stock that sells for $40 dollars per share that earned $4 per share over the previous year would have a P/E of 10. P/E’s can be an indicator of value relative to other similar stocks when taking growth rates into consideration.
F P/E: Forward P/E’s calculate a stock’s current price divided by expected earnings for the following year. For instance, a stock that sells for $50 per share that was expected to earn $5 per share would have a F P/E of 10.
Beta: Beta is a measure of a stock’s trading volatility level in comparison to the entire market. A beta of 1 means that the stock tends to trade with the market. A beta of less than 1 means that the stock’s price tends to be less volatile than the market. A beta of greater than 1 means that the stock’s price will be more volatile than the market. If a stock has a beta of 1.4, in theory it is 40% more volatile than the rest of the market.
EPS (Earnings Per Share): A company’s profit, or earnings, divided by the number of outstanding shares. For instance, if a company earned $60 million in a year and had 6 million outstanding shares, the company’s earnings per share (EPS) would be $10.
Dividend: A cash reward given by companies to shareholders of stock, typically on a quarterly basis as determined by the company. Dividends are most often given by very profitable or mature companies as an incentive for owning and holding shares. The ‘dividend’ metric in a stock quote is the actual cash reward per share given to shareholders in the most recent quarter.
Yield: Yield is a percentage that reflects the return received from dividends paid on stocks over the most recent quarter (multiplied out over a year) relative to its current price. For instance, a stock that is priced at $80 that most recently paid a quarterly dividend $2 of of would have a yield of 10% ($2 x 4 quarters/$80 = 0.10 = 10%).
Shares: The total number of outstanding shares that the company has issued for public trading.
Institutionally Own: The percentage of outstanding shares of the stock that are owned by financial institutions (mutual funds, pension funds, etc.).