How to Calculate Market Shares

Knowing a company's market share is integral when you are looking to invest in a company. Market share is the percentage a company has of an overall market. For instance, if they sell "widgets," market share will tell you what percentage of all "widgets" made in the world they sell. If a company is growing market share, that is positive, if they are losing, it is of course negative.

Instructions

1. Define your market before you calculate. This means that the sales of Coca-Cola are a much smaller wedge than sales of Coca-Cola products (which encompasses Minute Maid, Sprite and more.) Specify the market you are trying to calculate.

2. Search for the total number of items sold in your market. Thestreet.com or Yahoo! Finance are great places to learn sales figures of large corporations. Simply look at their quarterly and yearly findings about the product you are interested in. For instance, Apple will break down the number of iPods and iPhones it sold. Find the number in your market for every company that competes in the space.

3. Divide the number of units that your company (or the company that you are interested in) sold by the number of total units in the space.

4. Calculate the percentage of market share. A simple equation would be if your company sold 10 widgets and the industry sold 100 widgets. Then your company would have a 10 percent market share.

5. Determine if the market share is growing or shrinking. Earnings coupled with growth propel a stock higher. So if your company is gaining market share over competitors in a hot market, then it may make it an attractive investment. (Consult your broker or do your own due diligence before buying.) Conversely if it is losing market share, then you might want to look at the competitor who is stealing it.

Resources

• This is a great site with all sorts of helpful definitions, including how to calculate market share.
• Another great site for business terms.