Stocks fluctuate in price over time, sometimes even showing dramatic ups and downs from one day to the next. Some investors prefer to monitor these changes closely to stay on top of their investments. But even if you don’t watch your stocks on a daily basis, monitoring the net change percentage over time is essential to maintaining a successful portfolio.
The net change percentage is the percent a stock has changed in its net value. It's calculated using the following formula: percent increase = increase divided by original number multiplied by 100.
What Is Stock Percent Change?
Percentages can be applied to any numerical change, whether it’s your household spending habits or the sales in your store. It’s simply a matter of measuring the totals, noting the difference and applying a formula that helps you calculate a percentage. For investors, though, the calculation is generally a part of any published stock tally for the day, represented by either a plus or minus to let you know whether a stock’s price is up or down.
Instead of percent change, you may see the difference expressed as “net change,” which is the total dollar amount that it varied from one period to the next. If a stock closes at $5 one day and $5.50 the next, it had a net change of $0.50 per share. This information can be useful as investors look at the percentage change, since it shows them exactly how much the price actually was as it rose or fall.
How to Calculate Percent Change
Calculating stock percent change is fairly easy, as long as you have the information directly in front of you. You’ll need to know the original stock price, as well as the new stock price. Subtract the smaller of those two numbers from the larger and you’ll get the net change.
The percent change formula is percent increase = increase divided by original number multiplied by 100. So, if the net increase is $0.50 from an original price of $5, your formula would be $0.50 divided by $5 times 100, which would be 10. This means your stock increased by 10 percent from its original price of $5.
You can also adapt this same formula if a stock has decreased in value. If you find that your stock decreased $.50 from an original price of $5, you would still use percent increase = increase divided by original number multiplied by 100, but you would be calculating a loss rather than a gain.
Calculating Stock Worth
While the percent change formula is a popular method for monitoring a stock’s performance, the price-to-earnings ratio is a great way to determine the value of a stock. To calculate P/E, you’ll need the stock price and the earnings per share. However, in order to accurately calculate a stock’s current value, you’ll need to take a look at earnings statements for the most recent four quarters, which will give you what’s known as the trailing-12-month earnings per share.
Once you’ve looked up the earnings per share, you’ll need to determine a stock’s P/E ratio. You can generally find that on one of many financial websites. At that point, you’ll divide the P/E ratio by the earnings-per-share amount to get that stock’s current price. Although you can find this number without a mathematical formula, it demonstrates how you can use the P/E ratio and the trailing-12-month earnings per share to make estimates about where a stock is likely to go in the near future.
Monitoring Stock Prices
You can apply the percent change formula to monitor your own stocks, but it isn’t absolutely necessary. The same information is available online. You can download a stock market app or check an online market watch page that will give you the closing amount and net changes from one session to another. You can even look up stock market prices over a historical period.
What calculations can help with is covering those areas not listed online. You may want a stock percent change for the previous month or just a couple of weeks, for instance. By totaling the overall net change for that timeframe, you can get the information you need.
- A large net change percentage in either direction -- such as 5 percent or more -- often follows major news related to the stock. Such news might include a strong quarterly earnings report or an announcement of a merger with another company. Watch for large net change percentages in your stocks and other stocks in the same industry, and read the relevant news articles to find out information that can affect your investments.
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