If you are going to choose individual stocks, you are probably going to want to read some market data so you can better understand the investment. Luckily, this site has a slew of market data for thousands of stocks and ETFs. This may be far more data than you are getting from your brokerage. In the “Research” section, you can even filter your search based on certain criteria. That means you can spend less time going through a bunch of stocks you have no interest in and spend more time getting a better understanding of ones that you are actually considering. Once you find an investment that looks good, you can go to its page. Across the top, you will see several options to click on and learn more about the stock. They look like this:
We are going to go over each of these pages. The first page you see is the “Summary” page. This information may be the most familiar, and it is some of the most important data that people consider when purchasing a stock. You’ll see price charts, valuation and dividend information, a company description, and some other common and valuable information. A lot of what you find on this page will help you form expectations and opinions about an investment. You can get a rough idea of how the market feels about the stock, how volatile the share price has historically been, what kind of income you can earn for holding the stock, and much much more. All in all, the summary page is a really good place to start, and new investors would benefit from understanding it thoroughly. After that, you can move on to the subsequent pages and get a better understanding of the current events and fundamentals of the underlying business. Below, you can learn more about the individual sections of the “Summary” page.
Share price is constantly on everyone’s mind. It is generally the first and last thing that investors look at when trading. Despite this, there are limitations to what can be determined from looking solely at the share price.
You can’t determine the value of the company. A stock can have any number of shares outstanding. That means every stock’s shares represent a different “piece of the pie”. Just because a share costs a lot does not necessarily mean it is large or better. Just because the share price is low doesn’t mean the company is necessarily small or worse. To understand the true value of a company, you must look at market cap.
High share prices can create challenges for newer investors. For some stocks, a single share can set you back hundreds or even thousands of dollars. If this is a problem, consider buying fractional shares. You can get some exposure to the expensive stock you like while still having capital to lay out the rest of your portfolio.
This represents the total value of all common stock. It essentially represents the value of the business. The formula is simple:
(Share Price) x (Shares Outstanding) = Market Cap
When you purchase a share, you are accepting the market cap that the company is trading at and buying a piece for that price. The companies with the largest market caps tend to have…
- High revenues and profits
- High growth potential
- Low or reasonable debt
- Substantial assets
If a business ticks all the boxes, you can expect a higher market cap because people look at it as very investible. If they miss some of these, the market cap tends to be lower. You get a better deal, but the business you are buying isn’t as attractive as some others may be. At the same time, any business can improve any of those four things, which can lead to a rise in share price.
In addition to the value of the common stock, most businesses have debt. To get an idea of how much the full business is worth including its debts, take a look at “Enterprise Value” in the “Calculations & Metrics” section. Some market caps seem really low, but then you come to find a majority of operations are run on debt. That can be risky.
Price/Earnings (P/E TTM)
This is the price-to-earnings ratio (P/E) of the trailing twelve months (TTM). It tells us the multiple that a stock is trading at based on the earnings from last year. From that, we can get a sense of what kind of value we are getting based on current earnings. The formula looks like this:
(Share Price) / (Earnings per Share in the Past Year) = P/E TTM
Company A’s stock has a share price of $100. Last year, they earned a profit of $10 per share. They have a P/E TTM of 10x. ($100) / ($10) = 10.
To buy stock in company A, you have to pay 10 times last year’s earnings.
Company B’s stock also has a share price of $100. However, last year, they only earned a profit of $2 per share. They have a P/E TTM of 50x. ($100) / ($2) = 50.
To buy stock in company B, you have to pay 50 times last year’s earnings.
Company C’s stock has a share price of $100 as well. Last year, they made no profit at all. In fact, they lost money. They have a P/E TTM that is negative.
To buy stock in company C, you have to be okay with the fact that they lost money last year.
Which stock is the best buy? It’s impossible to say. It really depends on what you are looking for.
Company A (10 times earnings) could be appealing to a value investor. It made a good profit last year compared to its share price. It definitely could be a good buy; however, the market is telling you something. There is usually a reason that a stock will trade at such an attractive multiple. A lot of times the market does not see a lot of growth in the company’s future. It may still be a respectable purchase, but there simply isn’t a ton of excitement for the future.
Company B (50 times earnings) could be appealing to growth investors. They are not making as much profit per share now, but investors seem to be okay with that. Perhaps they are reinvesting a lot of their would-be profits into internal investments. All in all, a higher p/e generally indicates the market is more excited for the future. In the meantime, you are paying a premium based on current earnings. However, in the future, this stock could grow a lot and turn into an absolute cash cow.
Company C (negative earnings) is losing money. We’ve all been there. It could be a new company that is gaining its footing. It could be an established business that is going through troubled waters. Either way, the future is not certain. If the business can grow to be profitable, it could bring about huge rewards for shareholders. Obviously there is a higher level of uncertainty and these stocks can be riskier.
As always, it’s good to diversify. Different investors can certainly favor more growth or more value within their portfolio. Younger investors tend to go for riskier growth investments and hold them as they mature. Older investors may favor more stable value investments with predictable cash flow. It is all about personal preference.
The chart is a great way to understand the historic price movements of a security. Our price charts focus on helping investors get a detailed picture of longer-term historic price movements of a share. People can get a sense of two things when looking at one of these charts:
1. Volatility: Some stocks are very stable, and the line on the chart is flatter. Some stocks are much more volatile, and the line sees severe jerks up and down. Although there is no guarantee that a share will continue to experience the same pattern, it is nice to get an idea of how historically volatile the share price has been.
2. Trend: Is the chart moving up or down? There are no guarantees that trends will continue. However, a lot of investors like buying stocks that historically reward shareholders with price appreciation.
By looking at the 1-month chart, you can get an idea of how short-term news and events are impacting the stock. By looking at the all-time chart, you can get an idea of the strength of corporate management and operations over many years. Both are important to look at before buying.
The data in this section gives information similar to that of the chart. Like the pricing data from the chart, this can also give you a sense of volatility and trend.
Open/Close: The price of the share when the market opened and the price when it closed during the most recent trading day.
High/Low: The highest and lowest price that the stock traded at during the current or most recent trading day. The wider the range between these two numbers, the greater the volatility has been.
52 Week High/Low: The highest and lowest price that the stock traded at over the past year. Of course, the share price can go higher and lower than these numbers in the future. However, it is nice to see the share price range over the course of the past year. Like the chart, this helps you spot volatility and trends. If volatility scares you, you may want something that has a narrow range between the high and low. If you want to bet on a turnaround, perhaps you look for stocks trading near the low.
Volume/Average Volume: This is the amount of shares that are traded throughout the day. This is probably not a huge concern to you because most of what you will be trading has very high volume. When you trade, the order will most likely process almost instantly.
The dividend is the amount of cash that a share pays to the shareholder. It is one of the two ways that a stock can return value to shareholders. The other way is capital gains, which is when the share price goes up.
Dividends are typically paid every three months and they are an extremely passive form of income. This is cash that can be withdrawn and spent however you want, or you can leave it in your account and invest it. Not all stocks pay dividends, and there are other ways that businesses can use profits to return value to shareholders. Newer companies with a lot of internal growth opportunities are more likely to hold profits and invest in those. Established companies are more likely to pay large dividends because they have exhausted all of their most exciting internal projects. With that in mind, older investors who need income from their portfolio tend to go for higher dividend stocks. Younger investors who desire growth tend to favor lower dividend stocks.
Many dividend paying businesses try to raise their dividend a little bit every year so that shareholders earn more and more income. On the flipside, they can reduce or slash their dividend at any time if they feel it is unsustainable. If a company is paying out more than it earns, it may be a sign a dividend cut is coming. In addition to equity investments paying out earnings through dividends, bond ETFs pay out interest in the form of dividends as well. This is often a monthly payment, which is great for retirees.
Dividend: This is the actual dollar amount that one share has paid out in the past 12 months. Again, this is subject to change and can go up or down.
Dividend Yield: This is the amount the dividend is relative to the current share price. The formula is:
(Dividend) / (Current Share Price) = Dividend Yield
By comparing dividend yields, you can get an idea of which stocks pay out the most based on the share price. For example, if Stock A pays a dividend of $5 per year, and it has a share price of $100, then the yield would be 5%. Stock B also pays out $5 in dividends every year; however, it has a share price of $500. That is a 1% yield. Although the dollar amount is the same, Stock B is much less attractive to income investors. Be cautious of particularly high dividend yields. Extra income is great, but paying out too big a portion of earnings can hamper a firm’s growth.
Ex Dividend Date: In order to receive the next dividend payment, the investor needs to own the share before this date. The day before the ex dividend date is the record date. At the end of the day on the record date, all of the shareholders are recorded and they will earn the dividend payment in the coming weeks. Even if you sell the share after the record date, you still receive the dividend.
Payment: This is the payment that you will receive for every share that you own if you are holding before the ex dividend date. It is different from the “Dividend” data point above because that shows how much cash the stock has paid in the past year. This only shows the most recent or upcoming payment.
When you are retired, you may depend on these dividends to cover your living expenses. Until then, you will most likely reinvest them and grow your portfolio. The bigger your portfolio gets, the more income you can potentially earn!
Beta is an extremely popular way that investors measure the risk of individual securities compared to the return of the overall market. The average beta of the entire stock market is 1. Individual stocks, as well as other assets, have their own beta that is some multiple of that. If a beta is above 1, the share tends to experience higher volatility than the average of the market. If a beta is less than 1, the volatility tends to be lower.
For example, if a stock has a beta of 2 and the overall market goes up one percent, that stock would be expected to go up around two percent. If something has a beta of 0.5 and the overall market drops by two percent, that security would be expected to only go down by one percent. This is by no means a guarantee, these are all just averages based on historic performance. Things don’t usually move exactly as the beta predicts. However, beta can help give a sense of the volatility or stability of an investment based on historical averages.
Also note that some assets, like gold, can have a negative beta. These are investments that tend to perform better when the market is going down.
Beta measures how the changes in stock price compare to the overall market swings on a weekly and monthly basis. If you look at it over the past year, you get a short-term picture of how it compares. If you look at it 5-7 years out, you get a long-term picture. If you are looking for less volatility, you may be better off trading lower beta stocks. These might hold their value better during downturns, but they could also offer smaller returns when the market is going up. If you want higher volatility, look for higher beta. These can generate higher returns in good times, but they may fall more in bad times.