If you are interested in investing in a company, one of the key metrics you need to know is the number of outstanding shares.
Outstanding shares are the shares that are currently owned by all the shareholders of the company, including the insiders, the institutional investors, and the public.
Outstanding shares represent the ownership stake and the voting power of the shareholders in the company.
But what exactly are outstanding shares, and how can you find out how many shares a company has?
In this article we will explain the meaning and the importance of outstanding shares, and how to locate the number from various sources.
What are Outstanding Shares?
Outstanding shares are the shares that have been issued by a company and are held by the shareholders.
These shares are available for trading on the secondary market, such as a stock exchange or an over-the-counter (OTC) platform.
Outstanding shares do not include the shares that are held by the company itself, such as treasury shares or unissued shares.
The number of outstanding shares can change over time, depending on the actions of the company and the shareholders.
For example, the number of outstanding shares can increase if the company issues new shares to raise capital, or if the employees exercise their stock options.
On the other hand, the number of outstanding shares can decrease if the company buys back its own shares through a share repurchase program, or if the shareholders sell their shares to the company.
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Why are Outstanding Shares Important?
Outstanding shares are important for several reasons. First, outstanding shares are used to calculate the market capitalization of a company, which is the total value of the company’s equity.
market capitalization is calculated by multiplying the number of outstanding shares by the current share price.
For example, if a company has 100 million outstanding shares, and its share price is $50, its market capitalization is $5 billion.
Market capitalization is a widely used indicator of a company’s size, growth potential, and risk profile.
It can also be used to compare the performance and the valuation of different companies in the same industry or sector.
Second, outstanding shares are used to calculate the earnings per share (EPS) of a company, which is the amount of profit that the company earns for each share.
EPS is calculated by dividing the net income of the company by the average number of outstanding shares.
For example, if a company has a net income of $200 million, and its average number of outstanding shares is 100 million, its EPS is $2.
EPS is a key measure of a company’s profitability, efficiency, and growth. It can also be used to compare the earnings and the dividend potential of different companies.
Third, outstanding shares are used to calculate the cash flow per share (CFPS) of a company, which is the amount of cash that the company generates for each share.
CFPS is calculated by subtracting the preferred dividends from the operating cash flow of the company, and then dividing the result by the number of outstanding shares.
For example, if a company has an operating cash flow of $300 million, a preferred dividend of $50 million, and 100 million outstanding shares, its CFPS is $2.5.
CFPS is a useful measure of a company’s liquidity, solvency, and financial flexibility.
It can also be used to evaluate the cash return and the investment potential of different companies.
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How to Locate the Number of Outstanding Shares?
There are several ways to locate the number of outstanding shares of a company.
One of the most common and reliable sources is the company’s balance sheet, which is a financial statement that summarizes the company’s assets, liabilities, and shareholders’ equity.
The balance sheet can be found in the company’s annual report, quarterly report, or 10-K filing, which are available on the company’s website, the Securities and Exchange Commission (SEC) website, or other financial websites.
The balance sheet usually shows the number of outstanding shares under the shareholders’ equity section, which is near the bottom of the report.
The number of outstanding shares may be labeled as “common stock”, “capital stock”, or “shares outstanding”.
Sometimes, the balance sheet may also show the number of authorized shares, which are the maximum number of shares that the company can issue, and the number of treasury shares, which are the shares that the company has bought back and holds in its treasury.
Another way to locate the number of outstanding shares of a company is to use a stock screener, which is a tool that allows you to filter and sort stocks based on various criteria, such as market capitalization, EPS, CFPS, industry, and more.
A stock screener usually shows the number of outstanding shares along with other key information about the company, such as the share price, the market capitalization, the EPS, the CFPS, and more.
A third way to locate the number of outstanding shares of a company is to use a financial calculator, which is a device or an app that can perform various financial calculations, such as present value, future value, interest rate, annuity, and more.
A financial calculator can be found online, or as a physical device, such as the Texas Instruments BA II Plus or the HP 12C.
A financial calculator can help you find the number of outstanding shares by using the market capitalization and the share price of the company.
For example, if a company has a market capitalization of $5 billion, and its share price is $50, you can find the number of outstanding shares by dividing the market capitalization by the share price, which is 100 million.
Conclusion
Outstanding shares are the shares that are currently owned by all the shareholders of a company, and are available for trading on the secondary market.
Outstanding shares are important for calculating the market capitalization, the EPS, and the CFPS of a company, which are key indicators of the company’s size, profitability, growth, and value.
Outstanding shares can be located from various sources, such as the company’s balance sheet, a stock screener, or a financial calculator.
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