How to Calculate Outstanding Shares
The number of outstanding shares refers to the stock of a company that is currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders. The number of outstanding shares is listed on a company’s balance sheet under the heading “Capital Stock,” and it’s used to calculate key metrics such as a company’s market capitalization, earnings per share (EPS), and cash flow per share.
Here are a couple of ways you can calculate or find the number of outstanding shares:
- From the Company’s Financial Reports: The number of outstanding shares is often listed in the equity section of a company’s balance sheet, which is included in its annual report (10-K) and quarterly reports (10-Q). These documents can be found on the company’s investor relations website or through the U.S. Securities and Exchange Commission’s EDGAR database if the company is public in the United States.
- Using Market Capitalization and Share Price: If you know a company’s market capitalization (its total market value) and its current share price, you can calculate the number of outstanding shares. The formula is:Number of Outstanding Shares = Market Capitalization / Current Share Price
However, it’s important to note that the number of outstanding shares can change over time due to actions like stock splits, share buybacks, or issuance of new shares. So, the number of shares obtained from a prior balance sheet or calculated based on past data might not reflect the current number of outstanding shares. It’s always best to check the most recent financial statements or reliable financial news sources for up-to-date information.
Example of How to Calculate Outstanding Shares
Let’s look at an example using the market capitalization and share price method.
Suppose that a hypothetical company XYZ has a market capitalization of $5 billion and its current share price is $50. You can calculate the number of outstanding shares as follows:
Number of Outstanding Shares = Market Capitalization / Current Share Price
= $5,000,000,000 / $50 = 100,000,000 shares
So, the company XYZ has 100 million shares outstanding.
Now, let’s imagine that you’ve obtained the company’s recent annual report, and you want to verify this number. In the equity section of the balance sheet, you might see common stock listed with a value like $1,000,000, and a note indicating that this represents 100 million shares. This confirms that there are indeed 100 million shares outstanding, as calculated.
Remember, it’s important to use the most recent and accurate data when doing these calculations. The number of outstanding shares can change over time due to the issuance or repurchase of shares, stock splits, or other corporate actions. Always verify this data from trusted and official sources.