<\/span><\/h2>\nHowever, it is important to double-check that the number only includes shares that have actually been issued by the company. Outstanding shares are an important metric for investors and analysts to consider when evaluating a company. By knowing the number of outstanding shares, investors can determine the company’s market value, as well as calculate key metrics such as earnings per share and price-to-earnings ratio. For example, you can calculate a company\u2019s earnings per share (EPS), a common metric used to compare companies\u2019 performances. You can find a company\u2019s earnings per share by dividing the company\u2019s profit by its outstanding shares of common stock. For example, let\u2019s say you want to calculate the weighted average number of outstanding shares for a company over two reporting periods of 6 months each.<\/p>\n
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<\/span>Weighted Average Shares vs. Shares Outstanding<\/span><\/h2>\nGenerally, you won’t need to calculate this number yourself and it will be listed for you on a company’s 10-Q or 10-K filing. Instead, the weighted average incorporates changes in the number of outstanding shares over a certain period of time. If the company has not bought back shares from investors and does not have treasury shares, this line item won\u2019t show up on the balance sheet. Once you\u2019ve located the number of treasury stocks, write it down for your calculations. The balance sheet is a financial statement issued by the company that provides a full accounting of the company\u2019s assets, liabilities, and shareholder\u2019s equity at a particular moment in time.<\/p>\n
<\/span>Shares Outstanding vs. Floating Shares<\/span><\/h2>\n\n- The image below shows a section of Apple’s (AAPL -0.97%) balance sheet from 2016 through 2020.<\/li>\n
- First, the company has to do its job and have strong, consistent financial performance, delivering constant earnings growth.<\/li>\n
- For example, in a 2-for-1 stock split, the share price is halved, but the outstanding shares double, improving affordability and attracting a broader investor base.<\/li>\n
- And the number of issued shares can\u2019t exceed the authorized total number of shares.<\/li>\n<\/ul>\n
For basic weighted average shares, “basic” essentially means non-dilutive. The number of outstanding shares changes periodically as the company issues new shares or repurchases existing shares, splits its stock or reverse-splits it. In order to calculate a company\u2019s earnings per share (EPS), a company\u2019s net income is divided by its weighted average shares outstanding. Many companies buy back shares as part of their capital allocation strategy.<\/p>\n
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If a company does financing, that creates more shares outstanding. And if the company that buys the shares for a deep discount turns around and sells them into the market, those also become part of the float. Penny stock companies usually create more shares and dilute shareholders through toxic financings.<\/p>\n
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The weighted average shares outstanding, or the weighted average of outstanding shares, takes into consideration any changes in the number of outstanding shares over a specific reporting period. In effect, it weights any change in the number of shares outstanding according to the length of time that change was in effect. To understand the calculation of outstanding shares, let us take an example of a company that has recently issued 1000 shares. Out of these, 600 shares are issued as floating shares for the public, and 200 shares are issued as restricted shares to the company insiders. Potential investors in a company look at the EPS as an indicator of the company’s profitability and compare this metric with the EPS of other companies before making an investment decision.<\/p>\n
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