How to calculate earnings on stocks (2023)

Inventory gain is the profit you make when you sell a stock. To correctly calculate your profit or loss, you must include any commission paid when you buy or sell.

In this article, we will show you how to calculate stock profit. We'll also help you become familiar with the MarketBeat Stock Earnings Calculator, a free tool we offer to help investors calculate stock earnings.

What is the stock gain?

Equity profit is the profit you earn on stock transactions. You can calculate a stock's profit by subtracting the price you pay for the stock (including commissions) from the price you sell it for (minus commissions). A stock gain loss calculator can make the process easier than calculating it manually.

What is a stock market earnings calculator?

A stock earnings calculator is an interactive tool that allows you to easily calculate the earnings you can make from your stock investment. It's important to realize that it's not always 100% accurate because nobody can predict what might happen in the stock market. However, a stock earnings calculator can help you factor in commissions and other factors to help you make your decision.

(Video) Lesson 4: How to Calculate Gain on Stock

Why is a stock earnings calculator necessary?

Active traders can buy and sell shares daily and in some cases hourly. Many buy-and-hold investors may think that they will "never" sell a stock until they reach their specific investment goal.

In some cases this may be true. The phrase "time in market is more important than market momentum" describes the principle behind long-term investing.

But even long-term investors shouldn't leave their portfolio on autopilot. There are times when a stock moves sharply higher. Unless this move is accompanied by fundamental indicators that point to sustained growth, you might want to consider taking some of this stock's gains.

(Video) How to Calculate EPS (Earnings Per Share)

Learning when to sell a stock often depends on how much profit you need to make from a trade or the return on investment. MarketBeat offers a free stock earnings calculator that allows you to factor in commissions to see how much profit you are making on a particular trade.

Terminology in our stock earnings calculator

MarketBeat's Stock Profit Calculator provides a useful tool for calculating the profit or loss of a stock transaction. The tool takes the guesswork out of how stock earnings are calculated and includes the following variables:

  • Acquisition price:The purchase price refers to the price you pay for your shares. If you buy shares at different times, this is the average price per share.
  • Sale price:The ask price is the price at which you sell your shares.
  • Purchase commission:Commission is the fixed fee or percentage that your trading platform charges you when you buy shares.
  • sales commission:The sales commission is the fixed fee or percentage that your trading platform charges you when you sell shares.
  • Number of Actions:"Number of Shares" means the numerical value of all the shares you wish to sell.

How to calculate earnings on stocks

As mentioned above, you can calculate the profit made on a stock by subtracting the price paid for the stock (including commissions) from the selling price (minus commissions). You can calculate stock earnings in a few simple steps using the stock earnings calculator below.

Step 1: Enter the quote board (optional).

Enter a stock indicator (eg AAPL, AMZN, WMT, etc.) in the "Select a stock to complete ask price" field. MarketBeat's Stock Profit Calculator automatically enters the current ask price for the selected ticker.

Step 2: Enter the purchase price.

That's the price you pay for your shares. If you purchased the stock multiple times over a period of time, enter its average cost. Many trading platforms provide this information to investors. Appears on the page that shows your activity for a specific action.

Step 3: Enter the selling price.

If you enter a code in the "Choose a stock to complete the ask price" field, it will be filled in automatically. Otherwise, you can enter the selling price here. Keep in mind that if you use this calculator during a trading session, the stock price is likely to change. Volatile stocks can fluctuate more than other stocks.

Step 4: Enter the purchase commission.

If you are using a platform that offers commission-free trading, enter 0% in this field. Otherwise, enter the commission you pay when you buy a share. If your broker charges a commission, it will be in the form of a percentage. If your broker charges a flat fee, enter a dollar amount.

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Step 4: Enter the sales commission.

The same applies to the sales commission entry. If you use a platform that offers commission-free transactions, enter 0% in this field. Otherwise, enter the commission your broker charges you when you sell a stock. Like the commission, it comes in the form of a percentage. As a fixed fee, it will come in the form of a dollar amount.

Step 5: Enter the number of shares you own.

Finally, enter the number of shares you want to sell. You can enter fractions of shares.

Let's recap all this with a fictional example of calculating stock earnings:

On November 6, 2020, Mary expects Tesla (NASDAQ:TSLA) stock to trade at $143.32 per share. The general election has just ended, and she believes the new Biden administration will adopt policies that are more favorable to electric vehicles. Mary buys 100 shares of TSLA because she thinks the stock will go up. The trading platform she uses them charges a 2% commission for buying the shares.

One year later, on November 5, 2021, TSLA shares are trading at $407.36. There are signs that growth stocks will drop significantly. Mary still believes in the long-term prospects of TSLA stock, but decides to cut her position in half. You execute an order to sell 50 Tesla shares at a price of $407.36. She also pays a 2% commission for this transaction.

She calculates her inventory gain using the following steps:

  1. Multiply the current share price by 50 (the number of shares sold): $407.36 x 50﹦ $20,368.
  2. Multiply that number by 0.02 (the sales commission): $20,368 x 0.02 ﹦ $407.36.
  3. Subtract the two numbers: $20,368 - $407.36﹦ $19,960.64.

This is what Mary would gain from the sale. Calculating profit requires four additional steps:

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  1. You would multiply the price at which you bought the shares by 50 (the number of shares sold): $143.32 x 50﹦ $7,166.
  2. You would then multiply that number by 0.02 (the application fee): $7166 x 0.02 ﹦ $143.32.
  3. You would then add the purchase commission to the purchase price: $7,166.02 + $143.32﹦ $7,309.34.
  4. Finally, Maria would subtract the smaller number in step six from the larger number in step three: $19,960.64 - $7,309.94﹦12.651,32$.

To make a profit on a stock, you must buy it at the correct price. Most investors understand the logic behind buying low and selling high. However, making a profit also requires knowing if and when to sell a stock for a profit.

Knowing when to sell a stock when it's profitable is more of an art than a science. If you're a long-term investor, you might think you're just buying and holding. In that case, you wouldn't think of selling a profitable stock unless you needed the money for other reasons.

There are times when all investors need to question the price action that occurs in a stock. The stock price can rise to a point where profit-taking makes sense. This does not mean that you have to sell your entire position. However, there may be times when it's a good idea to remove some of that excess profit, such as:

  • The reason for owning the shares has changed.: Every stock in your portfolio must have a purpose. The company may be an industry leader or offer a product or service with little or no competition. It could have a solid dividend. If the motive changes, institutional investors may start to reconsider how much stock in that company they should own, and so will you.
  • The stock price rises sharply:When you buy a stock that is selling at a discount, it's not uncommon to see a 10% gain, even in a bear market. When the stock starts to rise 20% or more in a short period of time, and that gain is not supported by the underlying fundamentals, it could indicate that the stock is overbought.For example, a stock with many short interest rates may experience a short contraction. In many cases, this doesn't mean liquidating an entire position, but it could mean checking how much weight that stock carries in your portfolio. A sharp rise in price could mean that a stock that used to make up 20% of your portfolio now makes up 50% or more. A small profit protects your portfolio from the downside risk of the stock.
  • The share price hit the investor's target price:"If you don't know where you're going, any road will take you" applies in this situation. Many investors consider a price to buy a stock and a target price to sell it. However, a good guide can be the analyst's consensus forecast for a stock. If the stock starts to exceed this by a certain percentage, that could be the target price to trigger a sale. Setting a price target also adds discipline and structure to your investing routine, as it's easy to let emotions guide your investment decisions. In this case, greed can arise from the belief that a stock will continue to rise even when logic says it won't.
  • The stock hits a technical indicator:Investors who practice technical analysis have many different indicators to look at rather than a stock profit loss calculator. Take a look at the stock's one-year high, though. When a stock is struggling to break above its mark52 weeks high, can be a sign of resistance. This gives investors an idea that if the stock breaks above that point, the rally may be short-lived. It can also help to set a target price.
  • If the underlying company performs poorly:A company's earnings report can be a gold mine of information. Not only does it provide a testament to how a company fared financially in a given quarter, but in many cases a company also provides guidance on how it sees the rest of the year. If the company looks like it's going to have several tough quarters, it may be time to take stock profits.
  • If the market or sector is underperforming:While it's nice to have top stock, there are times when you own the best house on a bad street. Cyclical stocks like oil and gas or semiconductor stocks are not bad stocks in the long run, especially those that pay dividends. If the industry anticipates a downturn, it's a good idea to lock in some gains and wait for a buying opportunity.

Knowing how stock earnings are calculated gives you peace of mind

The objective of investing is to buy low and sell high, but there are times when a stock hits a high that doesn't last. In these cases, it may be necessary to make a profit to ensure that you take advantage of a once-in-a-lifetime opportunity.

Knowing how stock earnings are calculated requires knowing the price paid for a stock, the commission, and the selling price. MarketBeat Stock Earnings Calculator is a free tool we offer investors that makes it easy to calculate stock earnings.

Enjoy our MarketBeat Stock Price Earnings Calculator? Check out our other calculators to help you make great trading and investment decisions:

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