How to Calculate the Value of Common & Preferred Stock
Calculating the value of common and preferred stock can help you determine the monetary amount of your stock assets. Additionally, when you buy stock at initial public offerings of companies, you can calculate possible growth of the stock in the coming years as the company expands. At the very least, a basic understanding of stock calculations helps to determine the health of a business entity.
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Instructions
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Select the number of years in which you intend to value the stock. A time period between 15 and 25 years is typical for a healthy company, but you may select any period you want.
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Calculate the future earnings of the company by multiplying the time period you selected by the earnings for the most recent fiscal year. For example, if you chose a time period of 20 years and the company reported earnings of $2 million for the previous year, your future earnings would be $40 million.
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Determine the assets and liabilities currently on the company's books. Assets are usually equipment and cash on hand, while liabilities include such things as outstanding debts. Publicly traded companies usually state this information in their quarterly and yearly filings.
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Determine the number of shares outstanding.
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Subtract the company's liabilities from its assets, and add that number to the company's future earnings. Divide this result by the total number of shares outstanding. The final result is the stock value for both common and preferred stock of the company.
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References
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