These statements are available on companies’ investor relations pages or the SEC website. The information is also available on stock data websites like Stock Analysis. Shares outstanding is just the amount of all the company’s stock that’s in the hands of its stockholders. This measurement typically includes figures from the four quarters of the current fiscal year, some of which may have already elapsed, and some of which are yet to come. As a result, some of the data will be based on actual figures and some will be based on projections. Investors typically compare the EPS of two or more companies within the same industry to get a sense of how one company is performing relative to its peers.
The shares companies issue are known as authorized shares, which are the maximum number of shares they are lawfully permitted to make available to investors. A company’s float is an important number for investors because it indicates how many shares are actually available to be bought and sold by the general investing public. As such, index providers such as S&P and others are market leaders in setting a precedent for calculating floating stock methodologies. The company can increase or decrease the number of shares outstanding by issuing new shares or via share repurchases (buybacks).
What Is the Formula for Calculating Earnings per Share (EPS)?
In order to calculate a company’s earnings per share (EPS), a company’s net income is divided by its weighted average shares outstanding. Shares outstanding refers to the amount of stock held by shareholders, including restrictive shares held by company insiders. A company, however, may have authorized more shares than the number of outstanding but has not yet issued them. These may later appear in the form of a secondary offering, through converting convertible securities, or issued as part of employee compensation such as stock options.
Stocks outstanding rise as warrants are exercised, while Treasury stock counts fall. The company will now have to sell 100 shares from its treasury to the warrant holders if all of these warrants are exercised. A company can not directly improve its share turnover ratio, as share turnover is simply a reflection of how the market interacts with a company’s stock. While it is still a useful measurement, share turnover does have its limitations.
How to Calculate Weighted Average Shares Outstanding
While shares outstanding account for company stock that includes restricted shares and blocks of institutional shares, floating stock specifically refers to shares that are available for trading. Floating stock is calculated by taking outstanding shares and subtracting restricted shares. Restricted stock are shares that are owned by company insiders, employees and key shareholders that are under temporary restriction, and therefore cannot be traded. The term outstanding shares refers to a company’s stock currently held by all its shareholders. Outstanding shares include share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.
- Shares that are closely held are those that are owned by key shareholders, insiders, and employees.
- Similarly, the number of outstanding shares of a company can also decrease when the company decides to buy back its shares.
- The number of outstanding shares of a company changes constantly and is used to calculate its market capitalization.
- It compares the number of shares that change hands during a particular period with the total number of shares that could have been traded during that same period.
- Investors can look at any number of metrics to make their investment decisions.
- For example, let’s say a company has 100,000 shares outstanding at the start of the year.
Investors can find the total number of outstanding shares a company has on its balance sheet. Outstanding shares can also be used to calculate some key financial metrics, including a company’s market cap and its earnings per share. They are separate from treasury shares, which are held by the company itself. Fully diluted shares include shares outstanding formula not only those which are currently issued but also those that could be claimed through conversion. No, float—short for floating stock or floating shares—can’t be higher than shares outstanding. It’s always a smaller figure because it only counts the number of shares available for investment and trading on financial exchanges.
How Do Stock Buybacks Influence Shares Outstanding?
Calculating the weighted average number of shares resolves the problem by taking into account the length of time that the changed number was in effect. The weighted average number of shares is determined by taking the number of outstanding shares and multiplying it by the percentage of the reporting period for which that number applies for each period. In other words, the formula takes the number of shares outstanding during each month weighted by the number of months that those shares were outstanding. Floating stock is a narrower way of analyzing a company’s stock by shares. It excludes closely held shares, which are stock shares held by company insiders or controlling investors. These types of investors typically include officers, directors, and company foundations.
- P/B is often used to value companies in the financial sector (i.e. banks) and is calculated by taking a company’s share price and dividing it by the book value per share.
- Evaluating the trend of this number provides useful insights to investors.
- Fully diluted shares include not only those which are currently issued but also those that could be claimed through conversion.
- If you are analyzing a company’s stock, it is important to take into consideration the outstanding shares.
The trading volume is the average number of shares traded in a given period. Many exchanges or financial information websites will provide this information for any given security. Changes in shares outstanding over time also reveal how valuable shares are as a stake of ownership in the company, as the number of shares available directly affects this. A recent example of a reverse stock split is General Electric’s (GE) 1-for-8 reverse stock split during the summer of 2021. A company’s number of outstanding shares is dynamic, changing over time.
Of course, merely increasing the number of outstanding shares is no guarantee of success; the company has to deliver consistent earnings growth as well. A company’s outstanding shares decrease when there is a reverse stock split. A company generally embarks on a reverse split or share consolidation to bring its share price into the minimum range necessary to satisfy exchange listing requirements. While the lower number of outstanding shares often hampers liquidity, it could also deter short sellers since it becomes more difficult to borrow shares for short sales.
At a glance, it may seem that Apple’s stock performed nearly twice as well. Investors traded more shares of stock of Apple relative to the number of outstanding shares available to trade than compared to Microsoft. Companies can also undergo a reverse stock split or share consolidation.
How Outstanding Shares Work
Readers shall be fully liable/responsible for any decision taken on the basis of this article. The “% Weight” for each period is 25%, since each time period represents a quarter of the fiscal year. “Shares outstanding” also is a line in the data that is displayed with any stock quote.
Shares outstanding is a financial number that represents all the shares of a company’s stock that shareholders, including investors and employees, currently own. The seven billion floating shares are the shares considered for the free float, market capitalization index weightings. That’s because the vast majority of its shares are available to the general investing public. Please don’t confuse https://www.bookstime.com/ shares outstanding with authorized stock and issued stock as they are completely different, and shares outstanding is a subset of both authorized stock and issued stock. Another metric calculated using shares outstanding is the price-to-book (P/B) ratio. Two different ways to analyze a company through its shares outstanding are earnings per share (EPS) and cash flow per share (CFPS).
Example of Shares Outstanding vs. Floating Stock
The formula for determining the outstanding shares is the number of shares outstanding x current share price. Shares outstanding and floating stock are two types of share-number metrics that are important for investors. Although they both refer to all classes of a company’s common stock (as opposed to preferred stock), these two metrics are inherently different. Shares outstanding (or outstanding shares) are any shares that are held by shareholders and company insiders. Floating shares indicate the number of shares actually available for trading. Outstanding shares represent a company’s shares that are held by investors, whether they’re individual, institutional, or insiders.