Many people are intimidate by the stock market. Despite the fact that so many of us are involved in it through our 401(k), IRA or other retirement investment account, even the most basic quotes in the markets are incomprehensible to us. It is surprising how hard people work to make their money, only to be negligent when it comes to investing it. Being able to read a stock quote is one of the first steps in an education in the area. So what do all those numbers mean?

There are several values on a typical stock quote and while they may seem cryptic, they’re really not that complicated. Some of the most common and important values are:

Price

The price is the last price at which that stock traded. It might surprise you to learn that this is not necessarily the price at which you can purchase or sell the stock, this is due to the bid and ask values which we describe next.

Bid

The bid is the highest price anyone is currently offering for that stock. This is usually the price you will get when you are selling the stock if you sell it right that instant.

Ask

The ask is the lowest price at which anyone is offering to sell the stock. If you buy the stock this is usually the price you will pay. The difference between the bid and he ask price is called the spread.

Close

This value is the last price at which the stock traded on the previous trading day. It is often referred to as the ‘Previous Close’ during trading, or ‘Closing Price.’

Change

This value is the stock’s change from the previous day’s close. More precisely it is the difference between the last trade and the previous close.

Open

This is the first price at which a stock trades during the day.

Day’s Range

This is the range in which the stock has traded during the day, the lowest to highest prices of the day.

Yearly Range

The ‘yearly range’ or ‘52 week range’ is the highest and lowest the stock has traded in the previous year.

Volume

Volume is the number of shares that have traded in a given day. This number will generally increase throughout the day as more and more trades are executed.

Average Volume

This is the average number of shares that are generally bought and sold in a typical day. Usually the number will be designated for how long that average applies. So you might see “Average Volume (10 day)” or “Average Volume (3 month)”

Market Cap

The “Market Cap” or “Market Capitalization” of a company is how much all of its currently outstanding stock is worth. In other words this is the price times the number of shares that have been issued in the company. To think about it another way this is theoretically the price of the company.

Dividend

This is how much the company has paid out in dividends in the trailing year. Dividends are payments made to shareholders at specified times, to reward stockholders. This does not mean the company will continue to pay this, but they generally do not like to cut dividends.

Dividend Yield

This is the amount of the dividend, divided by the price of the stock. It tells you how much you would expect to make if the dividend remains the same for the next year as does the stock price. Neither of those is very likely to happen however.

EPS

“EPS” or “Earnings Per Share” is how much money the company has profited in the last twelve months. This does not mean they necessarily made that much cash and it is doubtful this will be the amount of a dividend. This number simply indicates how much the company’s net worth has changed in the last twelve months.

P/E

“P/E Ratio” or “Price/Earnings Ratio” is the ratio of the price of the stock to its EPS. It is generally considered a good sign for this ratio to be lower, since this indicates more earnings per dollar of price of the stock. For example, if a company has a price of $10 per share and $2 earnings per share, it would have a P/E ratio of 5.

Conclusion

While these are certainly not the only possible quotes that can be present on a stock quote, they are many of the most common numbers and can give you insight into how to interpret any other numbers you encounter.

    Posted in Investing from Investor on 18. Nov. 2008