Determining equity per share for stocks is a simple process that can be done with a few pieces of information. In this blog post, we will walk you through the steps necessary to calculate this metric. We will also provide an example so that you can see how it is done. Equity per share is important because it gives investors an idea of the value of their stock holdings. When you know how to calculate it, you can make better investment decisions!
What is equity per share, and why is it important to know?
Equity per share is a measure of the value of each share in a company. It is calculated by dividing the total equity that belongs to shareholders by the number of outstanding shares. This gives investors an idea of their relative ownership of the company. Especially when comparing this value to the stock price. For example, if the equity per share is closer to the stock or closer than its peers, this indicates that the stock may be undervalued.
How to calculate equity per share for stocks?
To calculate equity per share for stocks, you will need the following information:
1. Total Equity Shareholder's Equity – This is the total value of all assets owned by shareholders
2. Outstanding Shares – This is the total number of shares that have been issued and are currently outstanding
Once you have this information, you can follow this simple formula:
Equity per share = Total Equity Shareholder's Equity / Number of Outstanding Shares
Once you have all the necessary information, calculating equity per share is relatively straightforward and can be done with a few simple steps :
1. Gather the information required (total equity shareholders' equity [balance sheet] & number of outstanding shares [income statement])
2. Calculate equity per share using the formula above.
Let's go over a few practical examples.
Examples of calculating equity per share
In 2022 Apple Inc had a total equity shareholder's equity of $600 million and 3 billion shares outstanding.
Calculating the equity per share:
Equity per share = Total Equity Shareholder's Equity / Number of Outstanding Shares
= $600 million / 3 billion
= $0.20 per share
Therefore, Apple Inc has an equity per share of $0.20.
In 2020 Alphabet Inc had a total equity shareholder's equity of $400 million and 2 billion shares outstanding.
Calculating the equity per share
Equity per share = Total Equity Shareholder's Equity / Number of Outstanding Shares
= $400 million / 2 billion
= $0.20 per share
Therefore, Google Inc has an equity per share of $0.20
Automatic equity per share calculation
Instead of manually calculating the equity per share on your own, you can use a spreadsheet plugin like Wisesheets. This allows you to automatically retrieve this metric and dozens of other important stock metrics automatically in Excel and Google Sheets.
For example, to get Apple's equity per share in 2021, all you have to do is enter the following function on any cell:
=WISE("aapl", "Shareholders Equity Per Share", 2021)
Better yet, you can do this for hundreds of companies at once using the same function like this:
This allows you to quickly compare this value with that of different companies and determine which stocks may be undervalued or overvalued.
Equity value vs. market value
It is essential to remember that equity per share values represent the equity value shareholders are entitled to in a company, which may differ from the current market price. In addition, the market value of a stock may fluctuate significantly from its equity value due to external factors such as market sentiment and investor behavior. As well as internal factors not included in the company's balance sheet, such as intangible assets and potential growth prospects.
Therefore, it is important to consider both equity and market values when evaluating a stock. If the equity per share is much higher than the stock's current market price.
What are some factors that can affect the calculation?
1. Mergers and acquisitions – Merging with or acquiring another company can significantly affect equity per share by increasing the number of outstanding shares or changing the total shareholder's equity.
2. Stock repurchases – Companies will often buy back their own stocks to reduce the number of outstanding shares and increase the equity value per share.
3. Dividends – Paying out dividends to shareholders reduces the total shareholder's equity, thus decreasing the equity per share.
4. Stock splits – Splitting a stock into multiple parts can significantly decrease the equity per share by increasing the number of outstanding shares.
How can you use equity per share information to make investment decisions?
Equity per share can be a helpful metric when evaluating potential investments. For example, a stock with an equity per share higher or close to the current market price may indicate that it is undervalued and could be a good investment opportunity. On the other hand, if it is lower or too far from the current market price, the stock may be overvalued and should be avoided.
In addition, it can provide insight into a company's financial position and indicate its potential long-term performance. Companies with higher equity per share values are usually more financially secure than those with lower values and may have growth potential. Therefore, it is important to consider this metric when making investment decisions.
Conclusion
Equity per share is a key metric to consider when evaluating stocks. It can provide insight into the company's financial position and help investors make informed decisions about potential investments.
While the manual calculation of this metric is possible, using a spreadsheet plugin like Wisesheets allows for quick and easy calculation of equity per share values for hundreds of companies at once. With this information in hand, investors can make informed decisions about whether to invest in a particular stock.
By understanding how to calculate it and what factors affect it, you can have an edge in making wise investments.
Happy investing!
