share Archives

What is a Share?

A share: any of the equal portions into which invested capital is divided. Here’s what that means to investors.

The Merriam-Webster dictionary makes the definition of a share seem pretty simple. In fact, it is. When you buy a stock, you buy a share, or a portion, of a company. So when see a stock price, that is the price of one share.

Here’s what that might look like:

Company A is selling for $10 per share. If you were to put $100 into Company A’s stocks, you would own 10 shares. For most companies, that would be out of millions of shares, so you’re in no danger of having to sit in board meetings yet.

Shares come up in a lot of analysis of stocks, too. For example, profits are commonly discussed as earnings per share (EPS). If a company is expected to earn $1.26 in EPS, that literally means that the company will earn $1.26 profit this year for every single share of the company’s stock. In reality, the profit number could be in the hundreds of millions of dollars, or even billions of dollars. But investors go right to EPS so that the number is clear, simple and comparable to other stocks.

Of course, there’s more to determining whether or not a stock is a good buy than its share price and EPS. On the whole, though, if a business is fundamentally strong (i.e. it actually makes money), has a diversified product line, and is in a solid position in its market, you are 90% of the way to finding a good investment. The remaining 10% is just a matter of looking at a few parameters – no matter what the company does – to determine if it’s the best stock for your investment dollars.