How To Read A Stock Table?
Don’t Listen To Me, But Please Hear Me Out: Part 8
I was working in Miami between 2010 and 2014. Being single in a new city, I was able to save a lot. As I was working very long hours and traveling, I did not pay attention to my financials or building wealth. My paychecks were automatically deposited in a current account and it remained there. Yes, I was that bad.
One day in 2011, my bank’s branch manager called me and said he wanted to meet me in the office. He told me there was too much money in my account and wanted to know how I got it. I replied, rather offended: “Well, why don’t you look at my inward remittances and you will know every dollar I have came from my paychecks.” He laughed and said he wanted to talk to me about investments because I was essentially losing money by leaving it in my checking out. He was right.
Side Bar: When Americans says too much money, it could be a modest $10,000. 60% of Americans do not even have $400 in savings for an emergency. So, no, I was not sitting on 100’s of thousands of dollars.
Eventually, I opened an investment account with a broker. I explained that I absolutely had no time to check on the financial markets every day, and so expected the broker to watch out for my best interests. I was a moderate risk taker. But I told him I like Amazon and I wanted to buy the stock. He said, he does not understand Amazon but there are much better funds to put my money in. He seemed earnest. I thought he is an expert, he knows best. My portfolio did gain, but not compared to the market. 2 years later I moved my account to Schwab and I started managing my own investments. I have done much better on my own. You know what else? It absolutely does not take as much time as I thought it would.
By the way, Amazon was trading around $220 in August 2011. On June 15, as I wrote this blog, Amazon closed at $2,572. That would have been a 1,069% growth.
So, why am I telling you this story? Picking stocks is not easy. However, you can try to mitigate the risk of picking the wrong stocks if you knew how to do the following:
- Read a stock table
- Read a Balance Sheet, Income Statement and Cashflow Statement
- Keep abreast of the news that may impact the company and its operations
- Don’t panic and remain patient
Today, I will focus on the stock table.
Why It Is Important to Know the Terms
Do your eyes roll back every time an “expert” starts talking about the markets using fancy words?
“And He taught Adam all the names (of everything)…” THE HOLY QURAN: [AL-BAQARAH 2:31]
There is a verse in the Quran, quoted above, that says God taught Adam the names and qualities of everything. Knowledge is power. Apparently, this is what made Satan throw a hissy fit, because Adam knew more than Satan and therefore it would be harder for Satan to deceive Adam.
I believe some “experts” use esoteric words to justify their fees. While I don’t believe every advisor is crooked, you can protect yourself and be a more informed investor if you understood what they were saying. You could even show them that you are no dummy and are not going to fall for their fancy suits.
In this blog, I’ll attempt to Demystify the stock table.
Demystifying the Stock Table and Metrics
Let’s look at an awesome company like Nike. Please note, I may use stock price and share price interchangeably as well as stock and company.
On June 15, 2020, I looked up NIKE on Yahoo Finance.
On the left side is the Stock Table.
Previous Close: This is the price at which Nike closed on the previous trading day. In this case it was $96.3 / share.
Open: When the market opened, Nike stock price was $93.90.
BID: In any marketplace, there are two sides to every trade. Bid is the highest price a buyer is willing to pay for a stock. In this case it is $98.02. It is followed by another number, 800. This means that the maximum price buyers are willing to pay for NIKE is $98.02/share and they are willing to buy 800 shares at this price. This could be 1 buyer wanting 800 shares or many buyers put together wanting 800 shares. This is called the Bid Size. People are willing to buy at higher than the opening price, so there is demand for the stock.
ASK: This is the lowest price at which a seller is willing to sell Nike shares, in this case $100.40/share. As above, the number that follows is how many shares are available to sell at this price. In this case it is 1,100 and it could be from 1 seller or multiple sellers. This is the ASK Size.
Day’s Range: Just as it sounds, these are the lowest and highest prices between which NIKE traded during the day.
52 Week range*: I like this metric. It tells you what the lowest, and highest price at which Nike traded during the past 52 weeks. Today’s price is $97.84. So, it is closer to the highest price of $105.62 than the low end of $60.00. You may pause and reconsider buying the stock now as its close to its highs. However, at $97.84, it is still 7% below its highest price. So, it may still be a good buy at this price. But we need to do some more analysis to make a final decision. (*52 weeks because that makes 1 year).
Volume: Number of shares traded that day. In this case 8.4 Million. Volume traded tells you how liquid your investment is. Consistent high volumes are good because it means you can always find buyers and sellers for the stock.
Avg. Volume: 9.1 M is the average number of shares traded daily. So, today’s volume is less than the average daily volume. What does that tell us? We need to see if the volume traded is trending down or up compared to the average volume over a period of time.
Market Cap: Market Capitalization is the value of the company based on the share price.
Market Cap = Share Price X Number of Shares Outstanding.
Nike has a market cap of $152.144 Billion. Market cap will change daily based on the price of the share.
Beta: Beta measures how volatile or risky a stock is compared to the market. For example, the S&P 500 or NASDAQ has a Beta of 1 because they represent the market. If a stock has Beta < 1, it means it is less volatile than the market. Nike has a Beta < 1. Adding Nike to your stock portfolio could reduce the risk in the portfolio, but it also means, the returns could be lower than the market. If Beta > 1, then the stock price is more volatile than the market so could be riskier. But you should not look at just Beta to make a decision. High beta could also mean high potential for growth. Tesla has a beta of 1.17, Amazon has a beta of 1.32, Apple also has a beta of 1.17. All of these stocks have had phenomenal returns over the past 5-10 years. Adding these stocks could have increased risk in your portfolio, but it could also increase the returns.
EPS: Earnings Per Share. Earnings means Profits. Eps is basically a company’s total profits divided by total number of shares outstanding. TTM stands for trailing twelve months. For, example, Nike has an EPS of 2.71. This means every share earned a profit of $2.71.
PE (TTM): PE stands for Price to Earnings ratio. It is the stock price divided by the earnings per share of the company.
PE Ratio = Earnings per share (EPS) / Share Price*
*Average Share Price over a twelve month period.
PE is a good indicator of what investors think of the potential for growth for a particular stock. It also helps you compare apple to apples when deciding which stock to buy.
For ex, on June 15 2020, NIKE has a PE of 36.12. Adidas has a PE of 34.48, Lululemon has a PE of 68.69 and Under Armour has no PE because it has not been profitable and has negative EPS of (-1.15). So if you are looking at investing in the athletic, sportswear and accessories sector, now you can compare the PE’s across competing companies and figure out which is perhaps cheap or undervalued and which is too expensive or overvalued.
In Nike’s case, the stock is trading 36 times its earnings and Adidas is also trading close to 34 times earnings. However, Lululemon is trading at almost twice the earnings multiple (PE ) of Nike and Adidas. So, is Lululemon at a PE of 66 too expensive? Or does it mean investors value Lululemon even more and expect even faster and higher growth from them? Is Under Armour a bad investment or is it a smart purchase because its cheap now?
Earnings Date: This is the next date on which the company will announce its earnings report and how well they did in the previous quarter. They will also share information about expectation on the next quarters. Other information they share will be on if and why they missed or exceeded their earnings targets. Usually earnings are reported on the month following the end of the previous quarter.
Forward Dividend & Yield: It is percentage of a company’s current stock price that it expects to pay out as dividends over 12 months. In Nike’s case, at current stock price, it expects to pay out $0.98 per share in dividends over the next 12 months or 1.02% of the stock value. Suppose you have 100 shares of Nike. This means that your investment in Nike is worth Current Price X Number of shares.
$97.84 X 100 = $9,784/-
You can expect to get a dividend of $0.98 per share or $0.98 X 100 = $98 in dividends which is the same as a dividend yield of 1.02% ($98 / $97.84 )
Ex-Dividend Date: This is usually 1 or 2 business days before the actual date (Record Date) board of directors decide to declare dividends for its shareholders. Ex-Dividend Date is important and is bound by the stock exchange rules where the shares are listed.
You must own the stock on the Ex-Dividend date for you to receive the dividends. Nike’s Ex-Dividend date was May 28, 2020. So, if you owned the stock on 28th May 2020, but sold it on 29th May, 2020, you would receive the dividends announced for that period. However, had you sold the stock on 27th May 2020, then the buyer would receive the dividends for that period. So, it is important to keep an eye on this date before deciding to buy or sell the stock. Please note that the days have to be actual business days and not a holiday. So, for example, if the Record Date was on a Monday, then the Ex-Dividend date would be the previous Thursday.
I yr Target Est: This is what analysts who follow the stock in Yahoo Finance expect the stock price to be in 1 year. I don’t pay attention analyst predictions.
In my next blog, I will compare few stocks in a sector and show you how to consider picking one or more from the sector.
For now, I hope you feel less confused about the terms. Why don’t you check out the stock tables of some companies you love like Apple, Johnson & Johnson, or Moderna, the company backed by Bill Gates to develop the vaccine for Covid19.
I am NOT a certified broker or financial advisor. Please DO NOT make investment decisions based solely on my blogs. My intention is to show you how to research stocks or funds for yourself so you can feel empowered and knowledgeable to do your own investigations and invest with confidence. It is best to consult with your broker or advisor if you have questions. You can also reach me and I’ll do my best to help you with your queries.