Investing: Reading Stocks

Understanding all of the metrics presented to you as a new investor can feel a lot like picking up a new book series. You know the information being shared has some sort of purpose but you don’t know what it is just yet. This causes you to do one of two things. Either you hang on as long as you can to figure out why Harry Potter ends up with Ginny Weasley or you simply put it down and move on to something shorter and less complex.

But I mean seriously, Ginny Weasley?! There were literally hundreds of other characters that would have been a better fit. Was I the only one who thought Luna Lovegood was the one he was meant to end up with?

Sorry – let’s slam the brakes here. I got a little sidetracked. Let’s get back to the topic at hand: the stock landing page.

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When you first plug in the stock ticker or company name to pull up the company you’re interested in on Yahoo Finance or whichever site you want to use, you’ll see a landing page with a series of financials. As a new investor, those can be a little confusing. To make it easier, here’s a quick list of what each of those fields means:

Stock Landing Pages

Previous Close: this is the stock’s closing price on the previous trading day.

Open: the price the stock was listed at when the market opened on the current trading day

Bid: the price at which the market is willing to buy stock for if you’re selling it

Ask: the price at which the market is willing to sell the stock if you’re looking to buy it

Day’s Range: the price range for the stock through the day

52 Week Range: shows the previous price range over the last 52 weeks of trading

Volume: the number of shares or contracts traded in the market on any given day

Market Cap: the price the market has placed on the company being shown. This can be determined by multiplying the stock price by the number of shares issued.

Beta: allows you to see how volatile the stock is in relation to the market. If the beta is higher than one, the stock is seen as being more volatile than the market. The opposite is true if it’s less than one.

P/E Ratio (Price to Earnings): the share price relative to its earnings per share. You’ll most often hear this being stated as a stock’s earnings multiple and many new investors use this as a key indicator to know whether a stock is under or overvalued. An entirely separate article will be shared later to dive deeper into this specific metric.

EPS (Earnings Per Share): tells investors how profitable a company is. It’s calculated by taking the company’s net income (total profit after liabilities are subtracted) and subtracting any dividend payments before dividing it by the average outstanding shares.

Yield/Ex-dividend Date: this number talks to the amount of dividends a company pays its investors. The yield is the percent it pays annually to shareholders and the payments are made to those who hold shares by the ex-dividend date. Keep in mind that this can be paid annually, bi-annually, quarterly, or monthly.

1Y Target Est: if you’re interested to know what the analysts think the future price of the stock will be in a year, this is where you’ll find it. Typically, this is based on the one-year target price averaged over a pool of analysts.

And that’s typically all you’ll see on a stock’s landing page. While some sources may have more or less than what I’ve listed here, this is generally what financial websites will focus on because these are the commonly shared metrics between companies on the stock exchange. Keep in mind, however, that this is a very macro view of what should be looked at when you’re looking for an investment to pursue.  It can be extremely helpful when you’re looking to scan multiple companies to weed out the ones that don’t seem to present enough base metrics to justify investigating any further.

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Until next week,

BD

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