How to decipher stock data to better predict market power

How to decipher stock data? There are so many numbers and acronyms, where to begin?

To set the record straight, from the start of this post, this isn’t an article about how to read the entire markets. Its not about mind bending powers to know when the market will rise or fall. I’m not that good… yet. No, this article is about how to read the numbers you’ll see when you look up stocks online. For the rest of the article, all of my source material will be coming from Google Finance. I like it, and have been using it since I started invest back in 2009. Its not the most popular investing platform, but, you should be able to carry over the information from this lesson to any site. Basically, we’re going to get boring with numbers.

First, let’s take a look at a standard stock listing on Google… I will use the Royal Bank of Canada, as listed on the Toronto Stock Exchange (TSX).

decipher stock data with Google Finance

The above image is the top half of a standard stock listing on Google Finance. It can be broken into 3 sections. The first section is the main data regarding the stock itself. Numbers include how many of the stock are on the move during the time you are viewing the page (if the markets are open at that time). Other basic info includes the Open price, 52 week high, all the basics. Let’s look closer at these numbers…

  1.  decipher stock data with Google Finance
    • Range
      This shows the low and high value for the stock for the day you are viewing it.

      • Good to get an idea of how much the stock has moved that day, but its really just extra information.
    • 52 week
      This shows the highest and lowest price for the stock over the last 52 weeks (1 year).

      • This info is important because, typically, if  a stock is near its 52 week high, you don’t want to buy it. And if its near its 52 week low, its up to your judgement to decide if its “on sale” or turning into a bad stock and on its way down, down, down.
    • Open
      Shows the opening price of the stock for that day.

      • Good to know where the stock started its day to get an idea of how much it could move for the rest of the day.
    • Vol/Avg.
      Shows the current amount (volume) of stock being traded and what the average daily amount is.

      • This info can be very important!
      • If, for example, a stock is up (or down) by a large amount, if the volume is lower than the average, then its likely the stock will regulate itself the next day. If the value is higher now, it will be lower tomorrow, and vice versa.
      • If, however, the Vol is equal (or very close) to the the Average, then all is well and the change of the stock that day is supported by the markets.
    • Mkt cap
      This is the total market value of the shares outstanding of a publicly traded company; it is equal to the share price times the number of shares outstanding

      • Generally I don’t use this data, but I can imagine it has importance.
    • P/E
      This is the price-to-earnings ratio. It is defined as market price per share divided by annual earnings per share.

      • This data is extremely important when decided to purchase a stock.
      • There is no science behind this next theory, it is one that I got a long time ago, from a friend, and have stuck with it.
        • When the P/E is 15, that is the best time to purchase the stock.
        • If the P/E is lower than 15, the stock is undervalued and probably for a reason.
        • When the P/E is higher than 15, the stock is overvalued and so you might not get a big return on your initial stock value.
    • Div/yield
      The Dividend Yield Ratio. A percentage of how much the dividend is worth, each year.

      • This data is very important for anyone who is dividend investing, for obvious reasons.
      • The dividend is the cash payout you are guaranteed by the company of the stock. It is paid out in quarterly or monthly cash distributions.
      • 0.79/4.13 = The dividend will pay out $0.79 per distribution, for a total of 4.13% of the stock value, each year.
        • Royal Bank pays quarterly distributions of $0.79 per share. 0.79 x 4 distributions = $3.16 per year
        • Each Royal Bank stock is worth $76.53 (at the time of this post). $76.53 divided by $3.16 = 0.0413 which equals 4.13%.
    • EPS
      EPS = Earnings Per Share

      • EPS is very important when viewing dividend stocks.
      • If the EPS is equal to 4.5, for example, and the dividend payout is $6.50 (per year), then that would be bad. The company would be paying out more in dividends than it is making in earnings. This is not sustainable and will lead to problems.
      • If the EPS is equal to 3.2, for example, and the dividend payout is $1.50, then that is excellent. The company is making more than enough money to keep paying out the dividend, without problem.
    • The last of the statistics here, I am not completely familiar with and do not use in my judgement of purchasing stocks.
  2. Stock History
    • The graph that takes up most of the Google Finance page shows the history of the stock. Through the history of any company’s stock you can see how they battled crisis in the past, see the history of their dividend, and get a general feel for the stock.
    • Getting a general feel can include seeing when the stock hits lows and highs and using that knowledge to help predict the future. You can only help predict the future, you can never fully predict it.
  3. NEWS
    • The news section is hit and miss for me. I find sometimes the news that’s linked is very valuable and important. Indeed, when a stock goes way down or up in a single day you will find articles here explaining what’s happening. You can also sometimes find links to info such as dividend changes, and general info about the company and relative market the stock is in.
  4. Key Stats and Ratios
    • Further down the same page, towards the bottom right side of the page you will see a section titled “Key Stats and Ratios”.
    • This section is vitally important when choosing a stock to purchase.
    • If some of the stats are showing no growth, or in fact losses, on things like Net Profit, or Operating Margin, then stay away from the stock. Its not making money.
    • If you can see that these stats are showing positive numbers, then that’s great, for obvious reasons.
    • The worst part about this section, is that its not updated quickly enough. You could be looking at numbers from 2 quarters before you are currently in. So it can be up to 8 months old.
    • To get better, more up to date versions of this data, visit the company web page from the link below the data and find the public information regarding investing.
    • Each company that sells stocks has to show their earnings, debt, and all financial information somewhere that’s easy to get, as public information.

And that’s the basics on what to look at when viewing standard stock information online, or anywhere really. I hope this post has opened your eyes a bit in regards to what data is important when investing directly in stocks. Saying that, I know that I haven’t described everything as perfectly as possible, however, if you have any questions or comments regarding this article, please pop them down below. It would be great to talk shop with any of you out there.

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