How to Read the Stock Market

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Categories: How Tos

  • If you don't understand them, stock quotes are remarkably disorienting, full of mysterious numbers, symbols and acronyms. The truth is, you don't have to be financial genius to make sense of them, or any kind of genius at all. This page offers a guide to understanding how to read the stock market for the new investor.

  • Introduction

    • If you can't understand stock quotes, don't be ashamed—you have plenty of company outside the investment community. Those inscrutable little figures and abbreviations are based on a system that conveyed stock market changes via telegraph, printed out on a thin strip of paper called ticker tape. Modern stock quotes appear in somewhat expanded form in newspapers and online, while the basic ticker-tape format still lives on on your TV (running across the bottom of the screen on financial channels like Bloomberg Television), and on the giant displays posted outside financial institutions.

  • Find a Quote

    • Do you have a particular company in mind to invest in? If not, try reading the Wall Street Journal, browsing The Motley Fool or simply noting the manufacturer of some savvy new product that has caught your eye. Once you know the name of the company, you're ready to get to work.
    1. Go to Yahoo! Finance.
    2. Enter the name of the company in the field labeled "Get Quotes."
      • Through the magic of the internet, a stock quote should appear on your computer screen, much like the one below.
    3. Keep in mind that while the stock quotes on Yahoo! Finance are not identical to the ones you'll find on other websites or in financial newspapers, they do contain the same basic information. {{-}}

  • Read the Quote

    • Okay, so let's analyze the Intel stock quote pictured above, bit by bit.

  • Ticker Symbol

    • The ticker symbol is an abbreviation of the company name, originally meant to fit on actual ticker tape. It remains a useful shorthand system for conveying changes in stock prices.
    1. The Intel ticker symbol is identified as INTC.
    2. It's important to note the symbol, as it will be the primary reference point for your stock's value.
      • If you enter a ticker symbol on Google, the latest quote will automatically appear above the search results.
      • In most financial newspapers, stocks are identified only by their ticker symbol, by alphabetized listings.
      • The symbol is also the only identifier on modern digital tickers, such as the one in the photo at right.
    3. Stocks traded on the major US exchanges—the New York Stock Exchange, American Stock Exchange and NASDAQ (National Association of Securities Dealers Automated Quotations)—are abbreviated with one to four letters.
    4. Some symbols contain an extra letter or two, usually preceded by a period, in order to note something about the particular stock.
      • For example, BRK.B refers to lower-value "Class B" stock from the company Berkshire Hathaway (BRK).
      • For guides to the abbreviations used on ticker symbols, see the American Stock Exchange's list, as well as NASDAQ's.

  • Last Trade

    • This refers, for all intents and purposes, to the current value of the stock. Technically, last trade is the last reported price at which a share of the stock was sold, usually delayed around 15 minutes from the actual floor of the stock exchange.
    1. According to our example, the current value of one share of Nokia Corp. is $20.10.
    2. Newspapers list this figure under the heading "Close," because by the time they go to press, the stock market has already closed.

  • Trade Time

    • Trade time is the time at which the latest price was reported.
    1. In this case, it was 1:50 p.m. Eastern Time.

  • Change

    • Change refers to the difference between the current value and the closing price of the previous day.
    1. The price of one share of Nokia stock has changed $0.07.
    2. The downward arrow indicates that it has dropped by $0.07. An upward arrow would indicate a gain instead.
    3. Some quotes use the heading "Net Change" for this figure.

  • Previous Close

    • Previous close is the final value of the stock on the previous day.
    1. In this case, $34.72.

  • Open

    • Open refers to the starting value of the stock on the current day.

  • Bid and Ask

    • The bid and ask prices reflects the actual wheeling and dealing happening on the floor of the stock market. Bid identifies the highest price per share that stock traders are currently offering to buy a particular stock. The ask price identifies the lowest price per share that stock traders are currently offering to sell a particular stock.
    1. The bid price for a share of Intel is $20.09
      • The figure next to the bid price (35200) is the number of shares the buyer is seeking for this price.
    2. The ask price for a share of Intel is $20.10.
      • The figure next to the bid price (16800) is the number of shares the the seller is seeking to sell for this price.
    3. Only when the buyer and seller reach a compromise does a trade take place, setting the value of the stock.

  • 1y Target Est.

    • The 1 year target estimate is the projected price of one share for a year into the future. The figure is based on the median projection of a number of market analysts.
    1. The 1 Year Target Estimate for Intel is $26.64.
      • If one were to go only by this projection, it would be adventageous to buy shares of Intel at the current $20.10—however, analysts are often wrong.

  • Day's Range

    • The day's range specifies the lowest and highest price at which the stock has traded throughout the day.
    1. The lowest price for Intel in this example is $19.50, while the highest is $20.30.
    2. Quotes in newspapers usually list the range under two separate headings: "Low" and "High."

  • 52wk Range

    • The 52 week range specifies the lowest and highest price at which the stock has traded in the past year.
    1. The lowest price for share of Intel in the past year was $18.05, while the highest was $27.99.
    2. Quotes in newspapers usually list the range under two separate headings: "52wk Low" and "52wk High."
      • If this range is extremely wide, it warrants further research. It could either mean a huge loss or a huge gain—and either way, an unpredictable, volatile stock.

  • Volume

    1. 58,957,610 shares in Intel exchanged hands on the day in queston.
    2. In order to save print space, stock quotes in newspapers often round to the nearest hundred and omit the zeros on the end.
      • For example, the volume of Intel might list in a newspaper as 589576.

  • Avg Vol (3m)

  • Market Cap

    • Market capitalization is the total dollar value of the company.
    1. This figure determined by multiplying the cost per share in the last trade ($20.10) by the number of shares.
    2. Intel is currently worth $117,40B ("B" as in billion.)

  • P/E

    • The Price/Earnings ratio is a figure used to project the earning potential of a stock.
    1. The ratio is calculated by dividing the current price of a share by its overall earnings (price increase) in the past year.
    2. The P/E ratio of Intel is 17.11.
      • Stock with a higher P/E ratio (over 25) is considered to have high expectatios, while stock with a lower ratio (under 20) is not expected to do anything spectacular.

  • EPS

    • EPS is the stock's earnings per share for the last quarter.
    1. Intel's EPS is $1.18.
    2. In other words, if you had purchased one share of Intel at the beginning of the last quarter, you would have earned $1.18 by the end.

  • Div & Yield

    • Dividend and Yield are two figures that represent the amount of money paid to shareholders in dividends.
    1. Dividends are regular payments made to shareholders based on a company's profits.
      • In the last quarter, Intel shareholders earned 51 cents in dividends, per each share owned.
      • The dividend can be a useful gauge of a company's financial health. If it's too high a percentage of the earnings per share (over 75%), it may indicate that the company is not reinvesting enough of its profits to sustain itself.
    2. Yield measures the dividend as a percentage of each share.

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