Beginner’s Guide to the Yahoo Finance numbers

This guide will assume you are an absolute beginner when it comes to using ticker systems like Yahoo Finance. The world of stock investments might seem confusing and overwhelming, with plenty of symbols and slang to mull over.

Don’t worry. I’ve broken down the basics to the stock market before, with my beginner’s guide having been viewed over 100,000+ times, and I’ll do the same for the standard Yahoo finance interface.

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I’m going to go through each individual category and explain exactly what each of the abbreviations means.

Some of these categories are complex and hotly debated topics that you can research further at your pleasure. I’ll link some good sources for that within. Others are really straight forward and don’t mean much more than the surface definition. Hopefully those will be easy to comprehend.

Now the first thing you’ll see when you enter Yahoo finance’s main page is a search bar at the top, and then a convolution of charts, ads, video links, article links, broker ads, games ads… the list goes on.

That top search bar is going to be the place where you’ll find the most use and get the most data for stock market investing.

Every stock that is publicly traded will have its own ticker symbol. This symbol holds the key to all of the charts and data behind that stock.

For this how-to guide, we’re going to use the ticker for the biggest stock in the market right now, Apple Inc (AAPL).

When we type AAPL into the search bar, a myriad of data immediately hits our screen. If you are following along, it should look like this:

Right away, there’s a big number in bold. That’s the current price of the stock.

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In smaller numbers and in either red or green color is the difference in the stock price for today. You’ll see, in this order, an arrow going up for gain and down for loss, the amount of dollar value ($) gained or lost for the day, and the percentage of that difference compared to the price.

Right below these big numbers are the after hours prices, in a similar format to the above. These numbers represent some of the trading that occurred in brokers outside of normal business hours.

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After hours numbers can be used as an indicator for a stock’s future movement. The accuracy of this, however, is suspect even in times when extremely high pressure is forcing the market to a high after hours percent drop or rise.

While the after hours isn’t sufficient to predict the future, you can basically utilize this number as the current price of a stock. Price is, after all, the point at which buyers and sellers meet.

Next, we have the Prev Close. This is pretty straight forward as the previous close value. It means the price of the stock when the market closed yesterday.

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Keep in mind throughout this guide that the market hours for US exchanges such as the NYSE are 9:30am EST- 4:00pm EST. Other markets in other countries and time zones operate on their own schedule. As an investor, you can technically put in a trade at any time in the after hours.

The Open is the price of the stock when the market opened on this day.

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Now getting technical with the nuts and bolts behind the stock price, we have the bid and the ask.

The bid is the highest price a potential stock purchaser is willing to buy the stock at, and at that particular quantity. It’s the broker’s job (like Tradeking or Merrill Lynch) to match new clients’ transactions with bids or asks.

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The ask is similar to the bid but is just the opposite. It is the lowest price a stockholder is willing to sell his stock for.

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In both the bid and the ask, buyers and sellers of the same stock are competing with each other and essentially lining up orders for the brokers to fill. It works almost like an auction market would, with the best price on either side of the bid or ask skyrocketed to the top.

Next we have the 1y Target Est. Again, this is a straightforward definition. 1 year target estimate is simply the price that analysts have predicted the stock will be one year from now.

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The reliability behind these estimates are the true question here. The way I see it, the accuracy of an estimate has the same chance as any other estimate. It really is a 50-50 guess, and the stock could easily beat the estimate just as easily as fail the estimate.

The game of prediction is a fickle one. Forecasters are wrong just as much as they’re right when it comes to the weather, and they even have the luxury of technology giving us 12 hour lookbacks and predictive wind patterns. Sports forecasters are just the same. An estimate is as good as its analyst, and for the finance sites it could be anyone.

Yet when I’m looking at a stock that I’ve already deemed favorable… I’ll admit I take a favorable target estimate in a positive light.

This next number has to do with an advanced financial topic called volatility. Basically volatility measures how much movement a stock has gone through in its recent history. [When talking about recent history with stocks, it usually means 1 month, 3 months, 6 months, 1 year, 2 years, 5 years or 10 years].

A stock with much more buys than sells, or sells than buys, will have a higher volatility than a stock that has stayed relatively unmoved. Beta comes into the equation when you want to compare a stock’s volatility to the average of the market.

A stock with a beta of 1 is moving at the same volatility as the market. A stock with a beta greater than 1 is moving with greater volatility than the average, and a stock with a beta less than 1 has less volatility than the average.

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Low beta is actually a tool used by financial planners to lure customers into investing in their strategies. The effectiveness of beta has long been heralded by investment academia.

To read a controversial and extensive article debunking the all powerful beta, click on this link to open the article in a new tab.

The next row of Yahoo Finance is the next earnings release date. Earnings releases are important for two reasons.

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Number one, this is when the performance of a company is evaluated. Results are compared to estimates, and the stock price will move based on this data.

Secondly, new estimates are released on this day as well. When estimates guide lower, a more bearish sentiment surrounds the stock on the street. Of course, estimates guiding higher show a general abundance of earnings and can mean well for the stock moving forward.

You’ll tend to see a good amount of movement in the share price around earnings time. The caveat is that sometimes these movements are purely irrational. Meaning the stock could be crashing lower or surging higher regardless of the logic. Something to keep in mind for the investor out there.

The company’s ex-dividend date, or date preceding that an investor needs to hold the stock by to receive its dividend (usually the day before the ex-div), tends to either be announced or be right around the earnings release. Keep that in mind as well.

Next we have the Day’s Range. This is simply the high and low for the day that the stock has traded during business hours.

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The 52wk range is like the day’s range, but over a 52 week period. This will tell you the low and high for the stock’s past year. This is the high and lows for the closing price of the past year, not intraday highs or lows.

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Volume refers to the number of shares that have been bought and sold for the day. This is similar to the beta, but the volume gives us an exact number of just how much volatility a stock might potentially have.

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The difference between volume and volatility is that a stock might have heavy volume but low volatility, or vice versa. This can happen when a stock is being heavily traded, but isn’t moving much on the chart.

By itself, the volume number doesn’t tell us much. If you are following the stock for a while, however, it can help identify an entry point if you care about volume.

Which is where the average volume (3 months) comes in. This number tells us just how active the stock has been recently, and we can use the day’s volume as a comparison to evaluate current activity levels.

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Next is Market Cap, which is short for market capitalization. Market capitalization is the total size of a company in the stock market. It represents how many people own shares in the stock market, and moves up as the share price moves up.

Market capitalization is an easy calculation. It is the number of shares outstanding multiplied by the share price of a stock. For example, if there are 100 total shares of a company on Wall Street, and the company is trading at $5 a share, the market cap would be $500.

To read more about market capitalization, check out this informative guide on it.

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Besides market cap, the P/E is another standard measuring tool. P/E (ttm) refers to the P/E of the trailing 12 months, or of the past year.

P/E stands for Price to Earnings, and is calculated by dividing earnings by a stock’s share price.

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P/E is an extremely useful tool because it reflects the market sentiment surrounding a stock.Generally, a stock with a low P/E isn’t as favored by the market as a stock with a high P/E.

It makes sense if you think of it too. A stock with a higher price will have this characteristic because many people want to buy the stock. Thus, this higher price moves the P/E up.

However, the P/E can also be helpful in finding a company doing very well in the marketplace. Looking at the earnings side of the equation, a company with higher earnings will drive the P/E lower because holding price constant, higher earnings means a lower P/E.

P/E is really just the start of a much longer discussion into analyzing a stock. Once you can begin to understand the working behind the Price to Earnings ratio, you can rely that knowledge into understanding a company’s balance sheet, income statement and cash flow statement.

It’s powerful knowledge and having the confidence behind how the ratios work help you navigate your investments in the stock market. If you’re interested in attaining this knowledge, you can start with my easy 7 steps to Understanding the Stock market guide, first with the P/E ratio.

EPS (ttm) is another income statement analysis tool. It stands for earnings per share of the trailing twelve months, and it works as a good marker for how successful a company is doing.

While the earnings part of P/E refers to the total earnings of a stock, EPS allows the investor to compare earnings to each individual share.

It also lets the investor calculate P/E ratio by using the share price. It looks like: Price (by share) / Earnings (by share) or EPS.

To really get a good grasp on the concept of EPS, I highly recommend reading through the 7 steps guide.

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Finally, we have dividend and the yield percentage. This tells us how much dividends we will receive per share we purchase. The yield tells us what percentage of a company’s share price the dividend comes out to be.

When it comes to investing in dividends, it’s important to remember that the yield isn’t what’s all that important and profitable in a dividend investment strategy. It’s the growth of that dividend over many years that makes an initial investment very profitable as the years go on.

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I want to commend you for completing this guide. Hopefully it has done its part in decoding the sometimes challenging stock market numbers behind popular websites like Yahoo finance.

Important Debt to Equity Ratio Analysis

Fellow spreadsheet and investing enthusiasts, the world of Wall Street is open for understanding. There’s no better way to learn the stock market than to dig into the financial statements. However, there’s some important details within this process to be aware of, especially concerning debt to equity ratio analysis.

debt to equity ratio analysis

Here’s a great email question from a reader that should help everyone following along. Whether you are doing debt to equity ratio analysis, cash flow analysis, or even just looking at P/Es, this knowledge should help you get a bigger picture at what the numbers mean and how much analysis is really necessary.

Good Afternoon Andrew,

First and foremost, I apologize if this email is a little “rookie” sounding. I am still new to investing (started about 9 months ago) and have been following your guidance the entire way. I just read one of your latest posts about looking for stocks that have increased their dividend payment over the last 10 years.

With that being said, I started to do some research and found a company that looked intriguing ($BRO if you care.) I was looking over the financial statements (latest 10K from FY 2014) and I noticed something that through up a amber flag for me. I was always told when looking at the cash flow statement for a company you want to see a significant positive value in the Operating Activities section, and negative values in the Investing and Financing Activities sections.

With this company, the Operating Activities and Investing Activities were good but the Financing Activities held a significant positive value. Almost all of the positive value came from “proceeds from long term debt”. With that being said, although they took on a significant amount of debt in 2014 they are still only at a .53 D/E. Additionally they had a positive value in 2012 and then a negative value in 2013. When looking at the latest 10Q, the Cash Flow statement in in the negative for the 9 months of FY 2015.

I am overthinking this positive number? In other words, just because the company took on debt last year should that prevent me from purchasing the stock? I appreciate any insight you can provide. Thank You.

Brandon

Continue reading

Dealing with Stock Market Losses

All eyes were on me. My heart was racing.

But as I took a deep breath, my demeanor was calm. I had mentally prepared for this moment all offseason long.

It was the first game of our flag football season. We were the new team of the league, eager to win and prove ourselves.

As I took my deep breath, I went through my progressions. Option #1 wasn’t open, and neither was #2. Then the pressure came and I was forced out of the pocket. The referee counted out loud until he reached 6. Man, that was a lot faster than I thought.

Just like that, our season started with a sack. I kept my cool and pressed on. 2nd down had one of our guys wide open. I made the throw, a little low, and he dropped it.

Our 3rd down play gained some yardage but not enough for the first down. We punted, and I went back to the sidelines.

It was quite a terrible way to start the season. Couple that with our opponent scoring on their first drive, and we were in a precarious situation.

No matter. I was mentally prepared for this, had rehearsed losing situations over and over again. I would keep my cool, not panic, and continue to scheme and find ways to beat the other team.

By the second drive, I already knew what the defense was trying to do against me. They had a zone on one side with a single man island on the other, so I called a play to counter this perfectly.

The route was run great, the man was open, and my throw was good. At the last second, my receiver tripped, and the play was ruined. Our team found ourselves in another unsuccessful drive, and that’s when things really started to unravel.

The seemingly insurmountable score and lack of time to make up the difference started to affect my gameplay, no matter how calm and rational I thought I was. I really started to miss some throws, make poor decisions, until the game ended in a mercy rule.

This humbling experience got me to thinking about how many investors out there probably feel the same way.

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Our whole lives, the media tells us we will be rich, famous, and happy. The investment industry exploits people’s hopes, showing commercials with smiling actors who seem to never have to worry about stock market losses.

We spend our waking hours dutifully slaving away for the man, hoping to be rewarded someday with happiness, leisure, and luxury.

We’re told that the stock market is the place that will give us these things.

We’re told that these pleasures are reserved for retirement.

We’re told to keep our hopes high and our heads down low.

Surely the powers that be will reward our faithfulness and sacrifice with bountiful stock market returns, consistent and growing dividends, and wealth beyond our imagination.

Yet the reality of the stock market is much different.  Continue reading

Building a Dividend Stock Portfolio with a Late Start

It’s not too late, it’s never too late. Colonel Sanders didn’t start KFC until he was over 65. Look how big KFC is now.

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Attempting to build a dividend stock portfolio when you are already in your 40s or 50s may be disappointing, especially when you see the kinds of magic compounding numbers I share about investing when you are in your 20s.

So you may not have 40+ years to allow small amounts of money to turn into millions. But you can still have at least 25 foreseeable years of compounding left in you if you are in your 50s, or even more.

Life expectancy has increased with the innovations in technology and medicine, and more and more people are living well into their 80s (big retirement companies like ING are shoving this down our throats with their commercials). It’s no mystery.

And so while I’m far from being an expert at your problems at 50, I do have expertise in helping hundreds of thousands of readers with starting to invest.

A particular question I received from a reader really caught my eye, and inspired this post. Hopefully it will help other people like him to kick excuses to the curb and make progress towards their goals.

Hi Andrew,

I happened to stumble upon einvestingforbeginners and have really enjoyed reading your articles/blogs – very informative and helpful.

I have $20K I would like to invest and want to begin building a dividend stock portfolio. I’m 49 years old, so unfortunately, I don’t have the benefit of an early start like someone in their 20s or 30s. That said, I have a few questions:

· What vehicle would you recommend I use to begin purchasing (brokerage firms, etc.)?
· I expect to have about $300-500 per month in savings to contribute on a go-forward basis – once I build the initial portfolio, would you recommend I use a lump sum approach for future purchases or just contribute on a monthly basis (dollar cost averaging) to grow the portfolio.

Any advice you have would be great appreciated. I look forward to hearing from you.

Thank you.

Piccolo

The first question is easy. I’ve covered it many times before and the best resource for you is probably this blog post: 8 Top Stock Market Brokers for Beginners.

The next question regards a dilemma between lump sum investing and dollar cost averaging.  Continue reading

How to Find Good Dividend Stocks: 3 Metrics

It’s easy to find plenty of websites willing to share a “top ten” list of good dividend stocks for the year. Yet it’s much harder to find actual useful lessons that will help you in the long term.

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This frustrates me. Getting a quick tip about one good dividend stock won’t help anyone towards their financial goals.

Sure it feels good temporarily, but relying on new dividend stocks lists every year isn’t a reliable investment strategy.

So instead of give you what you’re looking for, presumably good dividend stocks, I’m going to teach you how to find good dividend stocks with 3 common metrics. I have no doubt this will be far more beneficial for you in the long term.

And it’s the long term that really matters.

Good Dividend Stocks: P/E

Let’s start with the most basic dividend metric. Price to earnings, or P/E ratio.

This ratio is simple to understand when explained correctly. It is the price you are paying for the earnings a company is giving you.

Look at it this way. If you buy a rental property for cash flow, the success of that investment depends on the price you paid for it and the cash flow it gives you.

A property that you paid $200,000 for might be a great deal if you can make $2,500 a month from it, and not such a great deal if you only make $1,500 a month from it. It’s not the dollar amounts, per se, but the ratio of price to earnings.

Buying dividend stocks works the same way. The lower the price to earnings on a company, the better deal you are getting on the company. It’s the simplest measurement of value.

Price to earnings works really well in helping you avoid extremely unfavorable situations. When a company is losing money, that stock will have a negative P/E ratio. You want to avoid negative P/E ratios at all costs because it indicates a company that is in serious trouble.

P/E also helps you avoid stocks that reach “bubble” territory. This is when Wall Street gets so excited about a stock that investors will literally pay anything to have it. A situation like this is so dangerous because the bubble always pops. We see it time and again.

For a good dividend stock, find a P/E less than 25.

Here’s the free tool I use to sort dividend stocks by P/E. It’s called FINVIZ, and it lets you sort from a wide variety of metrics. Simply select P/E: “Under 25” in the “Fundamental” Tab.

Good Dividend Stocks: D/E

The next dividend metric will help you avoid stocks that suddenly go bankrupt like Lehman Brothers did. I’m talking about the Debt to Equity ratio.

Debt to equity ratio works just like anybody’s personal finances. When people end up in bankruptcy court, it’s because they’ve accumulated too much debt on their credit cards, mortgages, and more. For stocks, it works the exact same way.  Continue reading