Showing posts with label Stock Share Price Calculator. Show all posts
Showing posts with label Stock Share Price Calculator. Show all posts

Monday, June 9, 2014

Review of stock share prices::How Much Is One Share of Microsoft Stock







Review of stock share prices::How Much Is One Share of Microsoft Stock








Many               large               and               intermediate               companies               have               been               repurchasing               their               shares               on               the               open               market.

This               practice               has               continued               for               several               years.

It               has               helped               many               companies               report               higher               quarterly               earnings               per               share.

A               company               may               report               the               same               income               as               in               previous               quarters               and               it               appears               that               earnings               are               rising.

That               is               because               those               earnings               are               divided               among               fewer               shares               of               stock.

In               2001,               buybacks               totaled               $132               billion.

Now,               in               2007,               they               are               expected               to               go               over               the               $600               billion               mark.

The               level               of               buybacks               continues               to               increase.

It               topped               out               at               $437               billion               last               year.

And,               over               the               last               seven               years,               the               amount               spent               on               share               repurchases               has               inched               close               to               the               two               trillion               dollar               mark.
               This               practice               has               been               another               one               of               Main               Street's               follow-the-leader               ploys.

A               few               companies               start               buying               back               shares,               and               soon               there               is               a               tidal               wave               of               copycats.

The               common               theme               on               Wall               Street               is               that               buybacks               result               in               higher               stock               prices.

The               heard               mentality               subscribes               to               this               belief;               hook,               line               and               sinker.

Such               companies               as               IBM,               Intel,               Microsoft,               Procter               and               Gamble               and               Dell               have               not               participated               in               the               huge               stock               market               run               up.

Sure,               their               stocks               may               be               somewhat               higher               from               the               lows               of               2002.

Overall,               they               have               been               buying               back               shares               steadfastly               and               their               stock               prices               have               basically               drifted               sideways.
               Why               buy               back               your               own               shares?

The               main               reason               is               to               keep               earnings               looking               healthy.

Healthier               earnings               usually               result               in               a               higher               stock               price.

For               the               main               owners               of               the               company's               shares,               such               as               inside               management,               this               means               a               higher               valuation               for               their               holdings.

Management               could               then               sell               those               shares               on               the               open               market               and               realize               greater               gains.

Actually,               the               company               does               nothing               to               create               more               value               within               itself.

The               process               is               a               function               of               reporting               income               based               on               a               lower               number               of               outstanding               shares.

Is               this               the               wisest               use               of               capital               funds?
               Younger               businesses,               when               they               become               public,               usually               have               a               small               number               of               shares               to               start               with.

After               many               years               of               growth               and               expansion,               the               number               of               outstanding               shares               grows               as               more               are               issued.

They               are               sold               to               investors               to               raise               more               capital.

Stock               splits               or               special               stock               dividends               also               help               to               increase               the               number               of               shares.

The               issuance               of               stock               options               to               company               employees               also               can               add               to               the               mix.

It               is               not               uncommon               for               a               company               to               pay               $40               on               the               open               market               for               a               share               of               its               stock.

And,               turn               around               and               issue               new               shares               from               redeemed               stock               options               for               $5               or               $10               a               share.

Essentially,               they               pay               out               $40               and               get               back               $10               for               a               share.

A               small               company               may               have               ten               or               20               million               shares               outstanding.

A               mature               company               could               have               hundreds               of               millions               or               even               billions               of               shares               on               the               books.
               Profits               could               be               used               to               expand               the               business.

They               can               be               used               to               buy               other               companies.

Also,               excess               profits               can               be               used               for               research               and               development.

Systems               and               equipment               can               be               upgraded               or               replaced.

New               buildings               and               facilities               can               be               constructed.

All               of               these               alternatives               help               to               create               jobs               and               build               a               stronger               company.

This               also               results               in               a               stronger               economy               because               many               businesses               are               affected.

Someone               has               to               supply               the               needed               equipment               and               technology               to               expand               these               businesses.
               A               company               may               also               pay               down               its               debts               or               pay               shareholders               a               higher               dividend.

There               are               a               number               of               uses               for               this               excess               cash               that               will,               in               the               long               run,               create               much               more               shareholder               value.

An               economic               downturn               will               not               keep               share               prices               higher.

All               that               spent               cash               will               be               wasted               when               share               prices               head               south.

Will               these               companies               be               buying               back               shares               when               they               are               trading               at               discount               prices?

Nope!

They               will               be               hoarding               their               cash               as               they               attempt               to               wait               out               the               economy.

This               leads               to               another               question?

How               much               stronger               would               the               economy               be               if               that               two               $trillion               had               been               spent               on               capital               goods               and               expansion?
               The               main               point               is               this;               share               buybacks               mask               the               true               growth               of               a               company.

Wall               Street               puts               a               high               value               on               EPS               (earnings               per               share).

That               bottom               line               figure               can               be               manipulated               by               changing               the               number               of               outstanding               shares.

Buybacks               have               looked               great               over               the               last               four               or               five               years.

These               companies               may               be               cutting               their               own               throats               with               their               shortsightedness.

True               economic               growth               can               only               be               sustained               by               investment               in               capital               goods               and               services.

This               leads               to               the               creation               of               viable               jobs.

More               people               working               means               more               consumers               available               to               buy               good               and               services.
               Share               buybacks               can               be               compared               to               dividends.

You               buy               a               stock               with               a               6%               dividend               yield,               only               to               find               that               it               has               fallen               by               20%               in               price.

Everyone               says               that               share               buybacks               are               a               sign               that               a               company               is               healthy.

But,               if               these               companies               are               expecting               to               be               doing               so               well               in               the               future,               then               why               not               expand               the               business?

This               would               normally               lead               to               bottom               line               growth               and               a               continued               favorable               share               price.
               The               questionable               use               of               cash               to               buy               back               shares               is               telling               us               a               different               story.

Could               it               be               that               many               companies               see               less               favorable               selling               climates               in               the               future?

The               quickest               way               to               stabilize               share               prices               is               to               lesson               the               float.

The               best               way               to               create               shareholder               value               is               to               grow               the               business.

You               can               bet               that               Uncle               Sam               has               his               eye               on               some               of               those               profits.

He               just               might               one               day               figure               that               if               all               a               company               has               to               do               is               buy               back               shares,               some               of               that               excess               cash               needs               to               be               taxed.

When               that               happens,               big               business               will               have               only               itself               to               blame.






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