How to Calculate Outstanding Shares

Restricted stock are shares that are owned by company insiders, employees and key shareholders that are under temporary restriction, and therefore cannot be traded. In most cases, the shares outstanding will be similar to the issued stock. net financial position However, since ABC Co. has repurchased shares in the past, it has a treasury stock. Once calculated, the investor can use the metric in further analysis. In the above equation, stock refers to a company’s common and preferred stock.

The number of shares outstanding is a crucial metric for various calculations. Once you know how to calculate the outstanding shares, you can use this number to calculate a number of valuation metrics, or measures of a company’s performance and future earnings potential. Once you’ve located the company’s balance sheet, find the line item for preferred stock. One key goal of the diluted share figure is to appropriately calculate earnings per share accounting for all of the potential shares out there, whether currently existing or underlying other instruments.

Issued Vs. Outstanding Vs. Authorized

Based in Atlanta, Georgia, William Adkins has been writing professionally since 2008. He writes about small business, finance and economics issues for publishers like Chron Small Business and Bizfluent.com. Adkins holds master’s degrees in history of business and labor and in sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.

This is because the total number of outstanding shares will change over time. Stock options will be exercised; restricted stock may vest after executives hit certain targets. Stock might be sold to raise capital; convertible debt might move into, or out of, the money.

Authorized Shares

However, you can calculate a reasonably accurate estimate of the number of shares outstanding using the stock’s market price and market capitalization or “market cap.” The number of shares outstanding increases when a company issues additional shares or when employees exercise stock options. Conversely, they decrease if the company buys back some of its issued shares through a share repurchase program. The number of shares outstanding can (and usually does) fluctuate over time. The number of shares outstanding increases if a company sells more shares to the public, splits its stock, or employees redeem stock options.

• Simply using the number of shares outstanding at the end of the reporting period might give a distorted picture of the company.
• But it’s important to look at the number of outstanding shares to know how many more shares could possibly enter the market.
• Basic shares are the number of outstanding stocks currently outstanding, however, fully diluted shares outstanding tells you how many outstanding shares there could potentially be.
• This number is also used to calculate several key financial metrics, so it’s important to understand how to calculate outstanding shares.

Shares outstanding are the stock that is held by a company’s shareholders on the open market. Along with individual shareholders, this includes restricted shares that are held by a company’s officers and institutional investors. In the above example, if the reporting periods were each half of a year, the resulting weighted average of outstanding shares would be equal to 150,000.

Motley Fool Investing Philosophy

The reason for that is that most public companies have instruments that provide for shares to be issued in the future. These instruments include stock options, stock warrants, and convertible debt. Typically, an average number is used because companies may issue or buy back stock throughout the year and that makes the actual outstanding shares and true earnings per share difficult to pin down.

Changes in the composition of the holdings do not change the number of total shares outstanding. New share issues, the exercise of stock options, conversion, and cancellations through buybacks will change the figure. Any authorized shares that are held by or sold to a corporation’s shareholders, exclusive of treasury stock which is held by the company itself, are known as outstanding shares.

What Is the Importance of Financial Intermediaries? (Explained)

Generally, both of these figures can be found on a company’s balance sheet. Alternatively, the total number of shares outstanding can be easily calculated as a company’s market capitalization divided by the current share price. Of course, merely increasing the number of outstanding shares is no guarantee of success; the company has to deliver consistent earnings growth as well. The number of outstanding shares is used in calculating key metrics such as a company’s market capitalization, as well as its earnings per share (EPS) and cash flow per share (CFPS). A company’s number of outstanding shares is not static and may fluctuate wildly over time.

Thus, in revisiting the EPS calculation, $200,000 divided by the 150,000 weighted average of outstanding shares would equal $1.33 in earnings per share. Usually, a company’s shares outstanding will be lower than its authorized shares. However, some large companies can also increase their authorized shares. In general, a company’s authorized shares represent the total outstanding shares that it can have after issuing all its shares.

Shares outstanding vs float

Similarly, it may arise from the jurisdiction in which companies operate. Sometimes, however, it may not be available in a company’s financial statements. Investors can calculate this figure as either basic or fully diluted outstanding shares. For the basic shares outstanding, the number will include the current number of shares. This number helps companies calculate dividend distributions and voting in the general meeting of shareholders. However, basic shares outstanding does not provide information about hybrid instruments.