Today, I want to talk about the basics of reading a stock.

When you search for a stock on Google or within your brokerage platform, you'll see some basic information and statistics about the stock. It usually looks something like this:

Some websites and brokerages show more, some show less. However, they all generally provide the same fundamental information. While this data alone is not enough to build a complete investment thesis, it provides a good starting point to understand the company.

With that being said, let’s dive in.

Primary Exchange

The primary exchange is where the stock is listed and where stockbrokers and traders can buy and sell it. The most popular stock exchanges in the U.S. are the New York Stock Exchange (NYSE) and the Nasdaq Stock Market (Nasdaq).

Ticker Symbol

The ticker symbol is used to identify a publicly traded stock on an exchange. Most ticker symbols are 1–5 letters long. For example, Apple Inc. has the ticker symbol $AAPL, and Amazon.com Inc. is $AMZN.

Open/Close

• Open is the first price at which a stock trades at the beginning of the trading day. For active stocks, this price is usually set right at 9:30 am Eastern Standard Time.

• Close or Previous Close is the price of the last fully completed trade of the day. Typically around 4:00 pm Eastern Standard Time.

52 Wk High/52 Wk Low

The 52-week range represents the highest and lowest prices of the stock over the past year.

Market Capitalization

Market Capitalization (or market cap) is the total market value of a company's outstanding shares. It is calculated as follows:

Market Cap = Current Share Price * Total Number of Shares Outstanding

P/E Ratio

The Price-to-Earnings Ratio (P/E Ratio) measures the stock's current share price relative to its per-share earnings. It is calculated as follows:

P/E Ratio = Market value per share / Earnings per share​

• P stands for price, which is what you pay for the stock.

• E stands for earnings, which is what you would earn from owning the stock if profits were paid out to shareholders.

The P/E ratio indicates the dollar amount an investor can expect to invest in a company to receive $1 of that company's earnings. For example, if a company has a P/E Ratio of 10, you would pay $10 for $1 of that company's earnings.

Dividend Yield

The dividend yield, expressed as a percentage, shows how much a company pays out in dividends each year relative to its stock price. It is calculated as follows:

Dividend Yield = Annual Dividends Per Share / Price Per Share

For example, a stock trading at $100 with a dividend yield of 2% would pay an investor $2 in dividends annually.

Volume

Volume represents the total number of shares traded on a given day. Investors (primarily traders) use volume to gauge interest in a stock and make trading decisions.

Conclusion

Now, the next time you look at a stock, you'll be able to read and understand some of the basic information. It’s not everything you need to know, but it's a great start.

Until next week,

Darrell