Shares outstanding is a stock market term that helps investors understand the value of a publicly traded company. The number of outstanding stock shares is an important component of several stock evaluation metrics. When a company sells shares or buys back shares, the event will change the value of the stock performance calculations.
The number of shares outstanding for a publicly traded company is the total number of shares held by investors in the company. The number includes share purchased on the stock market and held by individual investors as well as institutional investors like mutual funds, exchange-traded funds and pension funds. Also included in the shares outstanding are shares held by insiders such as company founders and officers.
Calculating Shares Outstanding
The exact number of outstanding share can be found on a company's quarterly earnings report. The number will be included in the earnings statement, which breaks down the revenues, expenses and net earnings for the quarter. Calculate an estimate of outstanding shares by dividing the market capitalization by the current share price. The market cap is shown on the stock price screen of financial websites like Yahoo! Finance and MarketWatch. For example, on March 4, 2011, Ford had a listed market capitalization of $51.19 billion and a share price of $14.33. Dividing the price into the market cap gives shares outstanding of approximately 3.572 billion.
Float and Restricted Shares
A discussion of shares outstanding includes understanding restricted shares and float. Restricted shares are those shares owned by insiders not available for trading on the market. The founders of Google own billions of dollars of Google shares, but these shares will not be trading in the stock market. The float is the number of shares available for buying and selling on the market. The float is the shares not restricted and not owned by company insiders.
The major stock market metrics calculated from the shares outstanding number are earnings per share and the company's market capitalization. The market capitalization was used above to back into the shares outstanding, and the published market caps are calculated by multiplying the current share price times the published shares outstanding. Earnings per share is calculated by dividing the total net earnings of a company by the number of shares outstanding. With earnings per share, investors can compare stocks of different prices.