How to Decipher a Stock Quote

How to Decipher a Stock Quote

Have you ever heard someone stand up from their computer at work and scream in excitement, "Check it out! My favorite stock is up 10%!"

Okay, so maybe working for a company like InvestingAnswers, I hear that a bit more than most people.

But if you plan to invest, you'll likely see one page -- the one that the person was screaming about -- quite often.

It doesn't matter if you're Warren Buffett, Suze Orman, or someone looking at stocks for the very first time -- this is one financial tool that you will need to know intimately if you want to really know how stocks work.

In fact, you will see one of these pages more often than any other in investing:

The stock quote. Filled with numbers and terms that may seem like a foreign language to most people, the stock quote contains the most basic snapshot of a stock's characteristics (most importantly, the stock's price) and some of the company's financial information.

But reading a stock quote doesn't have to be confusing -- or a waste of time. In fact, there's a huge up side -- read it correctly and it could lead you to a profitable company that's really worth investingin.

Listed below are all of the terms you'll see on a stock quote. We'll decipher the hieroglyphics and tell you what they all mean:

From The Top Of The Stock Quote

Stock Name -- Usually toward the top of the stock quote is the corporation's name. If you were to buy shares of this stock, you would own part of this company. Our example shows Google Inc.

Ticker Symbol -- Also called a stock symbol or a ticker, this shorthand string of letters identifies thestock. Every publicly traded corporation in the stock market has a unique ticker symbol that's usually made up of three to four letters and abbreviates the company's name (although bonds, mutual fundsand ETFs all have ticker symbols, too). To the left of the ticker symbol, you'll see which market exchange that stock is traded on. In our example, Google's ticker symbol is "GOOG" and it trades on the Nasdaq market exchange.

Price -- This is essentially the stock's price tag. It's the amount of money it costs to buy one share. Astock price can change by the second while the stock market is open as buyers and sellers trade. In this example, Google's stock is trading for a price of $697.25 per share.

Price Change -- This is the green or red number next to the stock's price. It shows how much thestock's price has changed (in terms of currency and percentage) from the time the market opened today until now. The colors mean something too: Green means the stock price is higher since market opening and red means the stock price is lower since market opening. In our example, Google's red price change shows the stock is down $7.26, or -1.04% since the stock market opened today.

The Left Column of the Stock Quote

Previous Close -- This shows what the stock's price was when the market last closed (The U.S.stock market officially closes at 4 p.m. EST on weekdays). In our example, Google's stock price was $704.51 when the stock market closed yesterday.

Open -- This shows what the stock's price was when the market opened this morning (The U.S.stock market officially opens at 9:30 a.m. EST). In our example, Google's stock opened at a price of $705.00.

Bid --Used mostly by more advanced investors, the bid price is the highest price that a prospective buyer is willing to pay per share. The "x 300" to the right of the bid price shows how many "lots" of the stock can be sold to the buyer for that price (1 lot = 100 shares). In our example, the bid price says someone can sell up to 300 lots of Google stock for a price of $697.17 per share. Here's howWall Street traders will say it: "Google shares bidding $697.17 by 300."

Ask -- Also for more advanced investors, the ask price is the lowest price that a seller will accept to sell a share of the stock. The "x 300" to the right of the ask price shows how many "lots" of the stockcan be bought from the seller for that price (1 lot = 100 shares). In our example, the ask price says someone can buy up to 300 lots of Google stock for a price of $697.40 per share. Wall Street traderswill say: "Google shares asking $697.40 by 300."

1 Year Target Est. -- Want to see how much a stock will be worth in the future? The one year target estimate is an analyst's forecast of what the price will be one year from today based on the company's earnings forecasts and other factors. Before you get too excited, know that every analyst has a different one-year target estimate and forecasts can vary widely, so take them with a grain of salt. In this example, the analyst projects Google's stock price will grow to $799.32 one year from today.

Beta -- This Greek word is actually a way to measure how risky a stock is. It shows how volatile astock's price movement has been compared to the rest of the stock market over the past 12 months. A stock with a beta of 1.0 means the stock's price will move alongside the market (for example, if thestock market fell or gained 10%, this stock's price has also tended to fall or gain 10%). A beta over 1.0 means the stock's price will swing more violently than the market, and a beta less than 1.0 signals that the stock's price will swing less than the market. In our example, Google's beta is 1.23, which means that if the stock market goes up or down 10% over the next year, we can expect Google's stock to go up or down 12.3%.

Next Earnings Date -- This is simply the date that investors can expect the company to publicly release its next earnings report. In our example, Google is expected to release its next earnings report on January 22, 2013, which will show us how profitable they were over the quarter.

The Right Column of the Stock Quote

Day's Range -- This shows the highest and lowest prices investors paid for the stock over the business day. In our example, Google's price over the day has been as low as $696.02 and as high as $705.34.

52 Wk Range -- This shows the highest and lowest prices that investors paid for the stock over the last 52 weeks. In our example, Google's price has been as low as $556.52 and as high as $774.38 over the past year.

Volume -- This tells you how many shares of that particular stock have been bought or sold throughout the trading day. Volume is incredibly important to traders, as the lower the volume of trades, the more difficult it becomes to buy or sell shares when you want to, and at the price you want. In our example, Google has been traded 970,625 times over the course of the day.

Avg Vol (3m) -- This shows you the average daily volume of that stock over the past three months. Technical analysts believe that volume can serve as a warning signal as to whether a stock is on the verge of breaking into upside territory (high volume) or into a downside trend (low volume). In our example, investors traded an average of 2,386,360 shares of Google per day over the past three months. That means with today's volume of 970,625 trades, it's been a relatively slow trading day for Google.

Market Cap -- Short for market capitalization, this is the entire company's market value, or how much money the shareholders have invested in the company at this very moment. If you wanted to buy the entire company, this is essentially how much it would cost. It's calculated by multiplying the stock's price by the total number of company shares that are owned by shareholders (shares outstanding). In our example, Google's market cap is $299.08 billion -- large enough to consider it a "large capstock."

P/E (ttm) --Called the price-to-earnings ratio (P/E), this is a basic measure of how well a company is performing. It compares a stock's current price to how much the company earned (made in profit) over the past twelve months ("ttm" means trailing twelve months). Put another way, if you were to buy the stock, it shows how much money you're paying (per share) for every $1 in earnings (per share) that company makes -- the lower the P/E ratio, the better the value you may be getting for your stock purchase (learn more about P/E here). In our example, Google has a P/E of 21.85.

EPS (ttm) -- Short for "earnings per share," EPS tells an investor how much profit the company made over the past twelve months, divided by the total number of shares that are being traded. For example, if a company earned $10,000 and there were 1,000 shares of the company owned by shareholders, that company earned $10 per share ($10,000 / 1,000 shares = $10 EPS). Investors like to see companies with a rising EPS year after year as it generally shows the company's profits are growing. In our example, Google earned $31.91 per share over the past year.

Div & Yield -- This shows how much money a company pays its shareholders annually in the form of dividends (per share). Google does not currently pay its shareholders a dividend, but if it had an annual dividend of $7 per share, you could expect to receive that much every year in dividend payments from the company. The "Yield" part shows how much of an annual return that dividend payment would give you for your investment. For example, if Google shares were to cost $700 to purchase and the stock has an annual dividend of $7 per share, then its dividend yield would be 1% ($7 divided by $700 is 1%).

The Investing Answer: The stock quote offers investors a snapshot of a stock and the company it represents. It's a quick way to check a stock's current price, its price trends (over days, months or years), its risk, its company's size and its value (how much you're getting in earnings or dividends in return for buying shares of the stock). If you become a regular stock investor, you're likely to look atstock quote pages more often than any sort of financial statement, so it's good to become familiar with the terms above.

The stock quote is a great starting point before you dive further into a company's financials and ultimately make your investing decision.

More From InvestingAnswers:

Beginner's Guide To Investing In Stocks
How Anyone Can Start Investing With Just $100
The Lazy Man's Retirement Portfolio

Learnvest

Financial planning made simple.

Get your free financial assessment.

Related Tags

Get the latest in your inbox.

Subscription failed!

You're Now Subscribed!