How to Calculate Selling Price of Stock to Earn Profit Margin

A profit margin, in the context of stock sales, generally refers to the amount of net profit obtained when an individual sells stock. Profit margin is often expressed in a ratio or percentage. For example, to earn a 10 percent profit margin on stock purchased for $100, you must sell the stock for approximately $110. Profit margin is calculated across multiple transactions so that you can calculate your profit margin for multiple stock sales.

Instructions

1. Establish the profit margin that you wish to obtain from your stock sales. Express the profit margin in a percentage. For example, perhaps you wish to obtain a 10 percent profit margin. This means that for every $10 in stock sold, you will earn a profit of $1.

2. Multiply the profit margin percentage by the purchase price of the stock. For example, perhaps the stock was purchased for $50 per share. In our example, for a profit margin of 10 percent, multiply 0.10 by $50 to obtain $5. The $5 figure is the profit margin represented in dollars.

3. Add the profit margin figure in dollars to the purchase price of the stock. In the example, add $5 to the purchase price of $50 to obtain $55. Therefore, you will know that you must sell the stock at a minimum price of $55 to obtain a profit margin of 10 percent.

Tips & Warnings

• If you wish to include any fees in the stock sales price calculation, you must add the amount of the fees to the stock to compensate for the loss in profit due to the fees.

• These calculations do not take into account brokerage or other fees associated with selling stock, which will reduce the profit made per stock sale. To minimize the effect on your profit margin, you should only sell stock in large quantities.

References

• "Stock Investing for Dummies"; Paul J. Mladjenovic; 2009
• "The Intelligent Investor: The Definitive Book on Value Investing"; Benjamin Graham, et al.; 2003