How to Calculate the Market Price Per Share
- 1). Go to your preferred media outlet and enter the ticker number of the stock that you are interested in. The first number to pop up is the current share price number or how much money it takes to buy one share of that stock.
- 2). Look at a graph of recent price movements. The price of a share fluctuates constantly, hence, looking at a graph puts the quoted price per share in perspective.
- 3). Examine the company's financial documents (online in the Security and Exchange Commission's EDGAR database) to determine for yourself if the market adequately prices the shares you are interested in. From the company's financial statements, you can see the earnings, the company's debt, the amount of actual cash the company has, investments, return on investments, equipment, dividends and more. You can use all of these to assess the value of a share and decide if the market is pricing shares reasonably.
- 4). Look up or calculate the price to earnings ratio (often displayed as "P/E") by dividing the share price by earnings per share. You can calculate earnings per share by taking the earnings stated in the financial statements and dividing them by the number of outstanding shares. The normal P/E range is 10 to 20; anything lower means that the share price is low relative to earnings, hopefully signaling that you can make back your initial investment fast. Anything higher means that the share price is overvalued in terms of current earnings, and investors may be too optimistic about a company's ability to grow its business.
- 5). Compare the book value (the total value of a company's assets) to its share price by dividing assets by outstanding shares. Companies often have share prices that are 5 or 6 times the value of assets per share, but anything higher could mean that a company does not have the substance to justify its shares' market price.
- 6). Look at the dividends and dividend yield. All news outlets display a share's dividend, expressed as a dollar amount, and yield, expressed as a percentage, under the share price. Companies pay dividends once the business reaches a mature stage in which it can distribute extra cash to shareholders instead of reinvesting it or paying off debt. Dividends make a share more valuable, as investors get money directly back as well as possible share price appreciation. A 2 to 3 percent dividend is healthy.
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