Investors generally hear analysts talk or write about a stock fundamentals and how to read stocks. There is no right or wrong view of making an investment decision on a company. You can either have a viewpoint of financial fundamentals, technical or a combination.
Fundamentals generally are driven by financial and stock performance and usually accompany a stock chart of the company on most financial platforms or trading systems.
You will see things like, the Open and Previous Close prices, the day Hi-Low range, and 52 Week Hi and Low of a particular security, generally these are self explanatory and easy to understand. Then you also see more complex values in a fundamental dataset. These are worth highlighting.
The Bid and Ask of a stock is a fairly easy to understand summary.
- The Bid and Ask is a two way pricing quotation that indicates the best price a security can be bought and or sold at that point in time.
- The Bid price is the maximum someone is willing to pay.
- The Ask price is the minimum someone is willing to receive for the security.
Obviously a successful trade happens when there are a buyer and seller agree upon a set price, most often time done electronically through broker systems tied to stock exchange and clearing platforms.
Sometimes analysts or trading professionals will look at the difference between the bid and ask – this is called the spread – it often times is an indicator of liquidity. The closer the bid and ask are – the more liquid a security is. If the bid and ask are far apart, then there is either no support for the stock or no buyers and sellers at that point and time.
Market Cap – this is a value expressed in dollars that is calculated by multiplying the most current stock price by the number of issued common shares of the company.
EPS – Earnings Per Share is the company profit divided by the outstanding shares at that point in time. This value is measured on a quarterly and or annual basis. EPS is a metric the investment community generally uses to illustrate companies' profitability.
Price to Earnings Ratio – is calculated by dividing the current market price of a security by the last 12 months' earnings per shares (EPS).
Dividend Yield Percentage – is the dividend value expressed in dollars per share divided by the price per share at that point in time. This is either done on a quarterly or annual basis. The dividend yield is a great way to measure how much cash flow or return on investment you’re getting for every dollar invested expressed as a percentage.