How stock quotes can better inform your investing decisions
- A stock quote is the price of a particular stock that's listed on an exchange.
- Stock quotes also provide the stock's low and high prices and the opening price for the day.
- The information shown on a stock quote will vary based on the platform or service you're using.
There's a lot to know about a stock before buying it. How has it been performing? And is the company doing well? Luckily, stock quotes can provide a lot of knowledge that tells investors the current price of a stock - including a wealth of additional information.
Here, we'll break down what a stock quote is and how to read one.
What is a stock quote?
A stock quote shows the price of a specific stock on an exchange, along with information about the stock. This information can include the number of shares traded that day, its previous closing price, most recent opening price, and much more. The information shown on a stock quote can also vary based on where you're looking.
"A stock quote is a real-time quote of what the overall market is willing to pay for that instrument at that very moment. Because stock quotes fluctuate every millisecond, the real-time aspect is extremely timely," says Nick Nazarov, Managing Partner of Benchmarq Trading Technologies.
Understanding how stock quotes work
The quote price - which is the most recent trading price of a stock - is based on negotiations between buyers and sellers. A buyer lists a bid price, which is the highest price they're willing to pay for the stock. Then the seller lists an ask price: the lowest price they will accept for the stock.
The difference between the bid and ask price of a stock is known as the bid-ask spread. The lower the spread, the more liquid the stock is, meaning the more demand there will be for that stock. Conversely, the higher the spread, the less demand. The stock quote lists the last price the stock actually traded for.
Quick tip: The bid-ask spread is paid by the buyer if they end up paying the asking price. If they end up selling at the bid price, then the seller will pay. The market-maker (individual or firm that facilitates the trade) earns the spread.
Information included in a stock quote is used by investors and other market participants to evaluate
"Stock quotes are not an investment strategy in and of itself," says Nazarov. "They're useful instruments in your investment toolbox to get an instant 'temperature check' of what the market is valuing that stock now."
History of stock quotes
- The first "stock quotes" were transmitted by semaphore control codes in France in the early 19th Century. The information contained was sparse noting only the price of the stock traded in Paris.
- Ticker tape, which followed on Nov. 15, 1867, provided much more detailed stock quotes until replaced by computerized delivery in the 1960s. Before 2001, stocks were quoted in fractions - in other words, 20½ for 20.50 ($20.50). After 2001, and to present day, quotes have been in decimals representing dollar amounts.
- The change from fractions to decimals resulted in a significant contraction in bid-ask spreads. Before 2001, stock quotes used fractions, and the smallest spread was 1/16th of a dollar ($0.0625). Under the present decimal system, the smallest spread is the equivalent of $0.01 (or less), resulting in more liquidity (tighter spreads) in the stock market.
How to read a stock quote
At first glance, a stock quote may seem like a 'hodge-podge' of random numbers and unfamiliar words. But once you understand what everything means, you'll find a wealth of information about the stock and the company that issued that stock.
Frequent trader and founder of Spyic, Katherine Brown, offers this advice about sources: "The most viable stock quotes will come from reputable sources with a proven record of giving correct indicators."
Let's walk through Alphabet's stock quote from
- Company name. This is the name of the publicly traded business. In this case, the company's name is Alphabet (formerly Google). This quote is for Alphabet's Class A shares, which are the most common type of shares issued.
- Stock symbol (SYM). Also referred to as a stock ticker, this is the abbreviation used to identify the stock when looking it up or following price fluctuations online. The stock symbol for Alphabet Class A shares is GOOGL.
- Current price. This is the most recent price available. If the markets are open, the price can be shown in real time or, more likely, delayed by up to 15 minutes. If markets are closed, this number will often change to the after-market price or pre-market trading price. After hours, an additional dollar amount will appear under the current price with a timestamp - typically close to closing - to use as a benchmark. (When the market is live, that number doesn't appear.)
Quick tip: Recall that prices are listed as decimals, representing a dollar amount (i.e., 2,501.01 = $2,501.01).
- Price change. To the right of the current price are two numbers, one in dollars, the other expressed as a percent. When markets are open these numbers show how much the price of the stock has changed (up or down) since trading began that day. When markets are closed, the numbers reflect changes based on after-hours or pre-market trading. Of the two numbers, percent change is considered more valuable since price change is not a good way to compare different-priced stocks.
Quick tip: Not all information shown here will appear for every listed stock or all the time. In some cases, data has to accumulate before the information appears.
- The chart. This section of the stock quote, which is located below the price information, includes valuable data as well as ways to access that data. By moving the cursor over the chart when it is live or delayed, you can look up Open/Close, High/Low price, Volume and other selected data points by date, depending on the range you select.
- Navigation bar. This menu at the top of the chart lets you select price fluctuation and other data over the time period you wish to view. Choices include Intraday, the previous week, month, 6 months, year-to-date (YTD), 1 year, 3 year, 5 year, or the maximum historical time span for the stock.
- Volume. This is a drop down menu that will give you several options to choose from such as volume, moving average, momentum, and more.
- Mountain-chart. This second drop-down menu lets you display different types of charts used for technical analysis, such as "mountain," "line," "OHLC," "candlestick," and "advanced."
On the right-hand side, you'll see the "stock snapshot" section of the quote.
It contains a wealth of information including:
- Prev. close. The previous trading day's closing price is often used as a benchmark to compare price movement going forward.
- Open. Today's opening price. Usually, yesterday's closing price, it's used to compare price movement, as the open is immediately outdated.
- Market cap. This is the total market value of all outstanding shares arrived at by multiplying share price by the total number of shares (below).
- Number of shares. This is the total number of shares held by shareholders and company insiders.
- Day low and day high. Today's low and high price so far, numbers that may change often during the trading day.
- 52 week low and 52 week high. This shows the stock's high and low prices over the past year to give investors some perspective over a longer period of time.
- P/E ratio. Price to Earnings ratio is the number of shares of a stock you would need to have enough earnings per share to buy one share of the stock. To calculate P/E, divide the stock's current price by its earnings per share (EPS). The result shows how expensive the stock is relative to its earnings. The lower the P/E ratio, the cheaper the stock.
- Free float in %. This is the percent of available shares not held by insiders, such as company executives, and are therefore readily tradable.
- EPS (Earnings Per Share) 2021. The dollar amount in earnings per common share paid by the company in 2021. It is calculated by dividing net annual profit by the total number of outstanding shares of common stock.
18. Book Value Per Share (BVPS). The ratio of equity available to shareholders divided by the number of outstanding shares. In theory, this is the amount (per share) investors would get if the company was liquidated.
Quick tip: If you divide the stock price by its BVPS, you get its price-to-book ratio (P/B ratio), which can be used to gauge whether a stock is undervalued, which could represent a buying opportunity. A P/B value under 1 is considered good.
- Cash flow per share. This shows the after-tax earnings (plus depreciation) per share. This is an important measure of a company's financial strength. In addition to everything discussed so far, many stock quotes, including those from Markets Insider, provide important additional research and contextual data. This information will vary from one stock quote source to another.
Additional Information. Lower down the page, you'll find a lot more information that's not shown in the above image:
- Historical prices over a selectable time period
- Analyst data including price targets and buy, hold, sell recommendations
- Analyst opinion including changes to recommendations by date
- Forward-looking estimates from several sources, including the company behind the stock, of revenue, dividends, earnings per share and more
- Insider activity by company officers and other insiders to include shares bought, sold, and held and stock price at the time of the trade
- Dividend calendar, including dividend and yield, for the quoted stock, if the company pays dividends
- Upcoming earnings reports including the date the report will be released
- Past events such as shareholder meetings or press conferences
The financial takeaway
The more information a stock quote provides, the better. When evaluating or comparing stocks make sure you use the same data points to ensure you're making an apples-to-apples comparison.
Also, use the same stock quote source when you're making comparisons so you have access to the same data that's treated in the same way.
"A stock quote can reveal numerous things if you look carefully. For example, the high and low of the day from a stock quote can give you an idea of what to expect in terms of a "daily range" of a stock's movement. Looking at where the stock closed within that range shows even more information: Did it close at the highs? Or near its lows?" says Nazarov.
Keep in mind that stock quotes are only part of the picture. The stock market is complicated and few venture there without seeking advice from a trusted broker or financial advisor.What is a stock exchange? Understanding the marketplace where shares are bought and sold What is stock? Learn the basics of investing in a public company How to buy a stock: A step-by-step guide to help you get started investing How many stocks should you own in your portfolio? Why there's no single 'right' answer
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