“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson
Stocks are one of the greatest ways to grow your money. Stocks or shares of a company are ownership of a company. While stocks can be exciting, reading a stock ticker or chart can be daunting but necessary. Today, we’ll help break down a stock ticker/chart and explain what each part is.
We’ll be using a stock ticker/chart of Alphabet (GOOGL) as an example.
The previous close is the price the stock sold for at the closing of the market the previous day the market was open.
The stock exchange is where the stock is sold. There are several stock exchanges including the New York Stock Exchange (NYSE) and Nasdaq. The stock exchange is a place where buyers and sellers of a stock meet and trade shares of that particular stock.
This is the price of the stock which is the price the most recent trade of the stock. For example, if a stock was $60, but then a buyer and seller traded that stock for $61, the price of the stock on the ticker would be $61 because it was the most recent trade. The arrow and color (green or red) tell you if the price of the stock is up or down from the previous close and by how much.
The stock chart shows the price of a stock over specified periods of time (1 day, 5 days, 1 month, 6 months, 1 year, 5 years, max). You can use the stock chart to see the price of the stock over the specified periods of time and determine patterns and trends.
The open is the price the stock starts at the beginning of the day. It’s not always the same as the previous close because, during aftermarket hours, the price can change.
Aftermarket hours are outside of regular market hours (9:30 AM – 4:00 PM EST for the NYSE and NASDAQ). Investors can trade during this time period as well but the stock price can be very volatile during aftermarket hours because of news or a company releasing their earnings.
Bid and Ask
The bid is the maximum price a buyer or buyers are willing to pay for the stock. The ask is the minimum price a seller or sellers are willing to sell the stock. The ask is always greater than the bid because investors want a higher price to sell at and a lower price to buy at.
1Y Target Estimate
The 1-year Target Estimate (1y Target Est) is the median target price forecasted by analysts covering the stock or the price they think it’s going to be in 1 year. For Alphabet’s stock, it is $1,336.80.
Note: Analysts are often WRONG as it’s difficult to accurately predict the price of a stock in 1 year, and the target estimate could be outdated.
The beta is a measure of the volatility of a stock. A beta of less than 1 means it’s less volatile than the market, while a beta of more than 1 means it’s more volatile than the market. A beta of 1 means it moves with the market. For example, a beta of 1.2 means the stock is 20% more volatile than the market.
The range of the price of a stock is the highest and lowest value the price has reached over certain periods of time. The volume is the number of shares of a stock traded from sellers to buyers that day. It’s often used to measure the significance of price movements.
The earnings date is the date the company is going to announce its earnings (their profitability over a period of time, usually in a quarter).
The market cap is the market value of a company’s outstanding shares. It’s calculated by multiplying the price of the stock multiplied by the total outstanding shares. The total outstanding shares are the total amount of shares issued to investors. This is the number reflecting the market’s valuation of the whole company.
The P/E ratio is the price/earnings per share ratio. This ratio often is a measurement of the value of a company. It represents how much investors are willing to pay for $1 of the company’s earnings. For example, if a company has a P/E of 10, you’re paying $10 for every $1 of the company’s earnings.
The EPS (Earnings Per Share) is the amount of a company’s profit that is allocated to each stock. It’s often used to measure a company’s profitability and tells you how much the company is making per share. Calculating EPS is easy: simply divide the company’s net earnings by the total outstanding shares.
The dividend yield is the percentage representing the dividends relative to price. When companies make money, they can either reinvest it into the company to foster growth or pay shareholders through dividends. Dividends are periodic payments made to shareholders. Note that not all companies pay a dividend, such as Alphabet.
The ex-dividend date determines whether you’ll receive a company’s dividend if they have one. If you purchase a stock on the ex-dividend date or after, you won’t receive the next dividend payment. That means that if you purchase it before, you’ll receive your dividend. Additionally, there’s the record date, which is the date that a shareholder must be on the company’s record of shareholders in order to receive their dividend.
Now you know how to read a stock ticker! While a stock ticker at first glance can be intimidating, it’s not that complicated once you learn the different parts of the stock ticker. Learning how to read a stock ticker is an important skill that every investor needs to know and can help you determine which stocks to invest in.