Stock quotes may seem intimidating at first, but once you understand the data points, you will be surprised with how simple yet effective they are.
Why you should be able to read a stock quote
You need to know the past, to understand the present. When you invest in a stock, you should have information about how its price has behaved (gone up and down) historically. After making sure that the stock qualifies on the checklist (Refer Finding Stocks for Investment), you need to decide on your investment timing as well.
Though we don’t believe that there is one “perfect” time to enter the market, investing at a time when the stock prices are reasonable and have not hit their saturation point is important. One of the most talked about financial strategies is to buy low and then sell high. Stock quotes support you to make these decisions. Even after investing in a stock, you should keep on monitoring their performance and growth on a periodic basis. Again stock quotes will come handy in such reviews.
Bottom Line: Stock quotes give you important insights about the stock’s performance. Without understanding them, you would not have complete information required to make a good buying or selling decision.
How to read stock quotes and tables?
In order to read stock quotes, you need to understand its various elements and their implications.
1) Company symbol
Stock tables have limited space that they can dedicate to each stock. Hence, in order to display maximum possible stocks, they display a symbol instead of the company’s name. For instance, Infosys limited is denoted as INFY on the stock table. Usually the stock table lists all stocks in alphabetical order (of symbols).
2) Highs and lows
Share prices keep on fluctuating throughout the course of the market working hours. The stock table mentions the two extreme points – the maximum price and minimum price that the stock traded in a particular day. The price range (difference between these two points) helps you to understand the volatility faced by the stock on a given day.
You can try to co-relate the volatility with the major events that have taken place so as to understand the impact of specific activities on that stock’s market value.
Learn more about How and Why Does a Share Price Rise and Fall?
3) 52-Week High and Low
This column helps you understand the stock’s growth or trading range for a longer time period. It shows the maximum price and the minimum price at which the stock has traded in the last 52 weeks (one year).
This column mentions the last price at which the stock was traded that day. For next day trading, you can refer to this close price as a ballpark figure of what you can pay for the stock.
5) Net Change
Net change indicates the growth or degrowth in the stock’s price as compared to the previous day. It is mentioned in absolute terms as well as a percentage of change.
Net change is calculated as:
(Today’s close price less Previous day’s close price) divided by previous day’s close price
When the net change is a positive value, the stock is highlighted in green colour. On the other hand, for a negative change, it is shown in red.
Dividends play a significant role in stock selection, especially for long term investors. Hence, stock tables provide information regarding the dividend per share or dividend yield so that you can compare it against the stock price. (If the dividend field is blank, it indicates that the company is currently not making any payouts)
Dividend Yield is calculated as Dividend per share divided by Stock price. Higher is the value of dividend yield, higher is the return on your investment.
Read How to invest in stocks in India for trading or long term investment.
7) PE Ratio
You would have come across this financial ratio in the earlier articles as well. It is one of the most commonly used data-point while assessing a stock’s true potential especially in relation to its financial performance. It indicates how much you (as an investor) are paying for every rupee earned by the company.
PE Ratio is calculated as:
Stock price divided by the EPS (Earning per share)
A high PE ratio indicates that the stock is overvalued(costly). Conversely, a low PE ratio indicates that it is undervalued.
8) Trading Volume
This shows the number of shares that were traded in a day. It is expressed in hundred. So, in order to get the actual number, you need to append “00” at the end of the mentioned number. A heavy trading volume is generally followed by a major change (up or down) in the stock price.
Stock quotes are a powerhouse of critical information, which can help transform a newbie investor into a savvy one! Read, understand, draw insights and take smart investment decisions!
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