Shares Outstanding: Types, How to Find, and Float

Typically, this consists of adding or removing components of net income that are deemed to be non-recurring. For instance, if the company’s net income was increased based on a one-time sale of a building, the analyst might deduct the proceeds from that sale, thereby reducing net income. An important aspect of EPS that is often ignored is the capital that is required to generate the earnings (net income) in the calculation. A metric that can be used to identify more efficient companies is the return on equity (ROE). Sometimes an adjustment to the numerator is required when calculating a fully diluted EPS.

A share repurchase generates a higher income per share, making each share more valuable. The number of outstanding shares is calculated by subtracting treasury stock from the shares issued. Generally, you won’t need to calculate this number yourself and it will be listed for you on a company’s 10-Q or 10-K filing. Authorized shares represent the maximum number of shares a company can issue.

As a real-world example, here is some information from Johnson & Johnson’s 2014 year-end balance sheet. The company has 4.32 billion authorized common shares, of which 3,119,843,000 have been issued as of December 31, 2014. Typically, a stock split occurs when a company is aiming to reduce the price of its shares. When this takes place, a company’s outstanding shares increase, and a higher degree of liquidity results.

They can participate in the election of the board of directors and vote on different corporate matters such as corporate objectives, policies, and stock splits. Likewise, a shrinking EPS figure might nonetheless lead to a price increase if analysts were expecting an even worse result. It is important to always judge EPS in relation to the company’s share price, such as by looking at the company’s P/E or earnings yield. Earnings per share is one of the most important metrics employed when determining a firm’s profitability on an absolute basis. It is also a major component of calculating the price-to-earnings (P/E) ratio, where the E in P/E refers to EPS.

Formula and Calculation for Earnings Per Share (EPS)

Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. Where the company increases or reduces the total number of shares or votes in the company, the company shall by law publish information regarding the change. We will use 562,500 because in the above calculation we assigned weights according to the time proportion that the share outstanding figure was unchanged. For example, the opening figure of 500,000 remained unchanged for 3 months (i.e., 25% of the total time of the year) until the start of second quarter, after which it changed. The main sources of shareholder rights are legislation in the company’s incorporation, corporate charter, and governance documents.

• These include changes that take place because of stock splits and reverse stock splits.
• Companies often intentionally keep these two figures different so the organization has future flexibility to sell more shares in the future should it have financing needs.
• One of the best ways to understand how authorized and outstanding shares work is through real-world examples.

Reserved shares can also be issued via stock warrants to a third party. Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more. Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets. Another metric calculated using shares outstanding is the price-to-book (P/B) ratio.

Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years.

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Like price, the percentage of company ownership expressed in each share is also reduced whenever more shares are created. You may also see outstanding shares used as a variable in financial ratios, making them important for fundamental analysis. In the end, as the number of outstanding shares decreases by 1,000, the company’s EPS increases by 6.89%. Therefore, if a company owns any diluting understanding what your startups burn rate really means securities, that would indicate a potential increase in the number of shares outstanding in the future. Conversely, the outstanding number of shares will decrease if the company buys back some of its issued shares through a share repurchase program. Shares outstanding are used to determine a company’s market capitalization, i.e. the total value of a company’s equity, or equity value.

When companies consider their stocks to be undervalued, they often initiate a share repurchase program, buying back some of their issued shares at a favorable price. Here’s what you need to know about the different share counts that publicly traded companies use, as well as how you can calculate the number of outstanding common shares. P/B is often used to value companies in the financial sector (i.e. banks) and is calculated by taking a company’s share price and dividing it by the book value per share. For example, the price-to-earnings (P/E) ratio calculates how much investors are paying for $1 of a company’s earnings by dividing the company’s share price by its EPS. While outstanding shares are a determinant of a stock’s liquidity, the latter is largely dependent on its share float. A company may have 100 million shares outstanding, but if 95 million of these shares are held by insiders and institutions, the float of only five million may constrain the stock’s liquidity.

The inputs you’ll need for this calculation are located on the balance sheet. The larger stock market is made up of multiple sectors you may want to invest in. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. These materials were downloaded from PwC’s Viewpoint (viewpoint.pwc.com) under license.

Common Stock

It is the figure most commonly reported in the financial media and is also the simplest definition of EPS. The number of outstanding or issued shares is always equal to or less than the total number of authorized shares. Companies often intentionally keep these two figures different so the organization has future flexibility to sell more shares in the future should it have financing needs. The number of shares actually available to trade is known as the float.

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It excludes closely held shares, which are stock shares held by company insiders or controlling investors. These types of investors typically include officers, directors, and company foundations. Moreover, the number of shares outstanding is extremely useful when monitoring how a company conducts its business, as things like stock splits also affect share numbers. Here, the balance sheet reports 8,019 million shares issued and 3,901 million treasury shares, as of September 30, 2022.

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Many companies decide to do a stock split to make their stock more affordable for a broader range of investors and to improve liquidity. You can find shares outstanding at the top of a company’s 10-Q or 10-K filing. Evaluating the trend of this number provides useful insights to investors. Importantly, the number of shares outstanding is dynamic and fluctuates over time. When you buy stock in a company, you are buying an ownership stake, which is issued as a share of stock. Despite the difference in voting rights, different classes usually enjoy the same rights to the company’s profits.

Shareholders have the right at any time to request conversion of Class A shares to Class C shares. During the month of October 2023, 2,601,931 Class A shares were converted to 2,601,931 Class C shares. However, assume that this company closed 100 stores over that period and ended the year with 400 stores.

What It Means for Individual Investors

Although EPS is widely used as a way to track a company’s performance, shareholders do not have direct access to those profits. A portion of the earnings may be distributed as a dividend, but all or a portion of the EPS can be retained by the company. Shareholders, through their representatives on the board of directors, would have to change the portion of EPS that is distributed through dividends to access more of those profits.