Every person seriously engaged in investing in the securities market is interested in the question of determining the profitability of certain stocks. Most often, you need to find out how much income a stock is currently generating, and whether this figure will continue in the future. Whether the investor will receive the expected profit or incur losses largely depends on the correct assessment of the stock's profitability.
It is necessary
calculator
Instructions
Step 1
Determine what type of income you intend to receive. When performing transactions with shares, two main types of income are possible: dividends and the difference between the purchase and sale prices of securities. The first type of income, as a rule, involves lower risk, but lower reward. On the other hand, speculation in securities is more risky, but if successful, it can bring significantly more income.
Step 2
To calculate the income when making transactions for the sale and purchase of shares, calculate the difference between the purchase price of the shares you have and the price at which you can actually sell them at the moment. The income will be equal to this difference. When calculating, also take into account the amount of commission that you will have to pay to an intermediary (brokerage company) for the ability to carry out transactions with securities.
Step 3
To determine the income received in the form of dividends, use a metric called the current stock return. This characteristic shows what material benefit you will receive if you sell a share at the current market price. At the same time, remember that it is advisable to calculate the profitability of a stock only for a certain period (for example, a year). To calculate the profitability of a stock, you also need to know the starting and ending prices for the selected period.
Step 4
In the simplest case, use the following formula to determine the return on a share: divide the profit for the selected period by the amount of the initial investment and multiply by 100%. In this case, calculate the profit as the difference between the selling price of the stock and the price of its purchase.
Step 5
Consider a specific example of calculating earnings on stocks. Suppose, on February 1, 2011, you purchased shares in an enterprise at a price of 131.3 rubles. per common share. On July 17 of the same year, you have the opportunity to sell shares at a price of 181.4 rubles. Plug these values into the formula:
Profitability = (181, 4 - 131, 3) / 131, 3 x 100% = 38, 15%.
In other words, for this period your income on shares of the company amounted to 38, 15%.
