The Anatomy Of A Stock

Let’s say that there is this company that has been around for a few years.  They are doing well, and they decide that they want to go public.  "Going public" means that they no longer wish to have private ownership in the company.  They want public ownership in order to sell shares of stock to people.  These shares of stock give people partial ownership in the company in exchange for money.  This is a great way for the company to get a lot of money quickly. 

If the company does well then the value of the shares of stock go up.  This makes the shareholders happy because now they can sell their shares to get more money.  If the company does poorly then the share prices go down and the shareholders are unhappy.  Unhappy shareholders might sell their shares which makes the company less valuable.

There are many details that go along with this process but this is basically how it works in a nutshell.  What you really need to understand is the terms that define a stock.  First take a look at the example image below from Yahoo Finance.  This is a snap shot of a stock’s common data figures.

I used one of my favorite stocks Johnson & Johnson (JNJ) for the example.  As you can see right at the top of the quote the current share price of the stock.  This quote just happens to be after the normal trade hours of the exchange (usually from 9:30 a.m. to 4:00 p.m. Eastern Time).  The after hours trade times for the exchange are 4:00 p.m. to 8:00 p.m. Eastern Time.

Last Trade:  Is pretty self explanatory. Is the share price the stock was traded at last.  To buy one share of this stock it would have cost you $50.66 the day before.

Trade Time: This is the time at which the last trade took place.

Change: This is the amount and percentage change the stock had for the day.  Notice the share price ended with a loss of 6 cents but after hours jumped up 35 cents.

Prev Close: This is the price the stock was when trading hours were over the previous day.

Open: The price of the stock on the first trade of the day.  It is not always close to the previous day’s closing price because company news the day before can cause people to want to buy or sell.

Bid: The Bid price is the price you get if you sell your stock.

Ask: The Ask price is the price you have to pay to buy a stock.  Note: these are showing N/A because this is a delayed quote and the New York stock exchange does not allow ask and bid prices to be shown on delayed quotes.

1y Target Est: The 1-year target price estimate represents the median target price as forecast by analysts covering the stock.

Day’s Range:  This is the range of prices the stock has changed overall for the day.

52wk Range:  This is the lowest price and highest price the stock has changed during the last 52 weeks.

Volume:  Volume is the number of shares traded in a company’s stock or in an entire market over a specified period, usually a day.

Avg Vol (3m):  Average Daily Volume is the monthly average of the cumulative trading volume during the last 3 months divided by 22 days.

Market Cap:  The Market Capitalization is calculated by multiplying the Last Trade by the current number of shares outstanding.

P/E (ttm):  Price to Earnings Ratio. This number is the previous closing stock price (see Prev Close) divided by the earnings per share, and reflects the value the market has placed on a stock.

EPS (ttm):  EPS is Earnings Per Share and (ttm) means trailing twelve months.  This figure is a rather complicated accounting term.  It basically means primary earnings from continuing operations attributable to each share of common stock outstanding.

Div & Yield:  This is the best term of all.  It is the amount the company pays you back in cash.  The dividend is the dollar amount paid per share (usually annually) and the yield is that amount calculated in a percentage.

This pretty much sums up the anatomy of a stock.  Some of these terms can be a bit complicated and if you need more information on them then you should check out Yahoo’s Glossary of Terms.  You may find different terms on different finance websites.  Some may be more in depth than others.  Looking at a quote for the first time can be a bit intimidating so I hope this article helps provide a better understanding of stock quotes for you.

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