A SHORT GUIDE TO INVESTING
How to read a stock quote:​
​
Firstly, a stock quote shows the price of a stock at a particular point during the trading day. A basic stock quote also provides other key data, such as the stock's bid and ask price, last-traded price and today's open. In the format of a list, it is very useful for investors as it allows us to analyze the stock and company's current performance. We can also easily compare the company's performance with other companies in the same industry using a stock quote. Nowadays, most investors access them online, so you can use your smartphone, tablet, or computer! However, you can still find a stock quote in newspapers and other printed media, though this is less common in today's society. You can access stock quotes and other data in several websites such as Yahoo Finance, Google Finance, and Marketwatch.com. Though these are all reliable sources that I recommend, it is important to note that some other websites offer delayed stock quotes, which show the prices of stocks in the last few minutes (e.g. 15 minutes). Some websites provide real-time quotes, which show the present share price. Unfortunately, accessing real-time quotes may cost money depending on the website.
​
Anyways, we will use an example of a stock quote found below to define each measure being shown.
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
Top left corner - Google Inc: This shows the name of the company, the symbol representing the stock in the market, and the stock exchange on which the company's stock trades. This stock quote represents Google Inc. (GOOG is the symbol) which trades on the Nasdaq stock exchange.
​
Top right corner - Last price: This is the last price the stock was traded at (in this example $697.25). Normally, there is a red or green number next to it. If it is a red number, this means that the company’s stock is down by a specific amount which will be shown typically in a negative percentage and a negative value (in this case $7.26). If it is green, this means that the stock has gone up.
​
Open and Previous Close: Open simply represents the price of one share when the market opened. Previous Close shows the last trading price of the share during the last trading day. When there’s a big difference between both of these terms, this is known as a gap and indicates that something big happened overnight.
​
Bid and Ask price: The bid and ask are the highest prices that buyers and sellers are willing to trade the stock at: the bid for the buying side, and the ask for the selling side. In the picture, the "Bid: 697.17 x 300" shows that there are potential buyers bidding $697.17 for up to 300 shares. This represents the highest current bid, so it's the best bid price at that moment. If you were to sell more than 300 shares of Google, you would mostly receive lower bids. The "Ask: 697.40 x 300" shows that there are potential sellers asking $697.40 for up to 300 shares. This is the lowest and best (for a buyer) currently asked price at at moment. If you were to buy more than 300 shares, you would most likely receive higher ask prices.
​
1y Target Est: ​This is the one year target estimate for the share price of the company. This number is not very important as it is based on opinions of analysts and tends to be too optimistic.
​
Beta: This indicates the volatility (variation and risk) of an asset or portfolio in comparison to the stock market as a whole. A beta of less than 1 shows that the stock is less volatile than the market. A beta of greater than 1 indicates that the stock's price is more volatile than the market. In this case, Google's stock is theoretically 23% more volatile than the market as its beta is 1.23. So the higher the beta, the riskier the stock.
​
Next Earnings date: This shows the next data at which the company's earnings will be reported. Thus, Google's earnings were to estimated to be reported on the 22 January, 2013.
​
Day's Range: This consists of two numbers where the first one is the lowest price at which the company’s share traded at, while the other number is the highest price. If the daily range is greater than normal, this is a very good sign. The daily range shows how much volatility there is in the stock and how a stock's share price is doing. If the last price is near the high end of the day's range, the share price has generally increased on that day. If it's near the low end, it's becoming cheaper. In this case, Google's share price is on the low end of the day's range, which is another demonstration that the share price is falling.
​
52wk Range: Similar to the daily range, this consists of two numbers where the first one represents the lowest traded price over the last 52 weeks (one year) and the second number shows the highest. By comparing the current price of the stock to the 52 week range, this provides a good idea of which direction the stock price is trending. If a company’s price is pushing the 52 week high, it could indicate that the stock price may continue rising, or a drop is about to happen.​
Volume: This shows the volume of shares from the company that have traded that day on the stock exchange. In this case, Google had traded 970,625 shares that day on the Nasdaq.
​
Avg Vol (3m): This shows the average volume over the last three months. As Google's volume was 970,625 and their Avg Vol (3) was 2,386,360, it might've been a relatively slow day for Google.
​
​Market Cap. (Market Capitalization): This demonstrates a company’s value during a certain time period. This is calculated by multiplying the total number of shares in the market by the current stock price. It basically shows how much the stock market would pay for the company, which is why it shows value. The bigger the market cap., the better this is as it is a sign of a safe company. Google's large market cap of $229.08 billion clearly shows that it is a large, safe company to invest in.
​
P/E Ratio (ttm): This is calculated by taking the company’s previous close and dividing it by their earnings per share. TTM stands for Trailing Twelve Months, which means that the ratio is using the earnings per share from the prior 12 months. P/E is a key measure of a stock's valuation. A higher P/E ratio indicates that a company’s stock price is quite expensive, while a lower P/E ratio indicates the opposite; a relatively cheap stock price. Note: the P/E ratio isn’t very significant on its own; it must be compared to other companies of similar size, company’s from the same industry, or to past P/E ratios of the company in order to determine whether the stock is under or overvalued.
​
EPS (ttm): A measurement of a company’s profit which is calculated by taking a company’s net income (this can be calculated by doing: profit - dividends) and then dividing it by the average number of outstanding shares. A higher EPS could be a good indicator that the company’s profits are high and may continue growing, but it doesn’t grant that it is a valuable company. In the last twelve months, Google earned $31.90 per share.
​
Dividend and Yield: A dividend is a payment (generally paid out quarterly) from a company to its shareholders based on the company’s profits. This is represented by two values: a number and percentage. The number is the amount of money given per share as a dividend. Multiplying the amount of shares you own by this number will show the amount of money earned from dividends. The percentage, otherwise called as the dividend yield, is the amount of the company’s share price you will receive as a dividend payment. Dividing the dividend by the share price provides the yield. Hoever, Google doesn't pay a dividend (this explains the N/A), so there is no yield.
​
Now, don't get nervous because of all these terms that might be hard to remember. Though they are all good measures that I recommend knowing, you don't need every single measure of a stock quote to pick a good stock. For example, the 1y Target Estimate is not a very useful measure. In addition, there are plenty other important ways to evaluate a stock. Lastly, I have also made a glossary where you can learn/review other basic terminology. When you don't understand a term, please take a look at the glossary as it is important that you comprehend it!
​
​
Next: How to read a Candlestick Chart
​​
