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In one of hisrecent videos, he broke down three numbers you should know tomake wealth-building easier.
Knowing a companys market capitalization can give investors insights into itsscale, stability and risk.
Shares outstanding represent the stocks it offers to executives inside the company and outside investors.
If thestock share supplyincreases, the share price will drop.
Profit
A companys profit is the amount of money left after paying offall business expenses.
Stock Price
Stock prices arent random numbers that a company chooses.
To determine stock prices, divide the market capitalization by the shares outstanding.
If that same company divides into 1 million shares, each share is worth $1.
In McDonalds case, the stock price equals about $257 per share.
you’ve got the option to find the multiple by dividing the companys market capitalization by the profits.
In this example, the answer comes out to 12.5, meaning McDonalds is selling for 12.5x earnings.
If McDonalds has amuch lower multiplecompared to others, it may be cheaper and worth buying.
Singh encouraged investors to dig deeper into each company and think about what they are buying into.
In the case of McDonalds, its more than just a burger restaurant.
Buying shares of McDonalds also means investing in the thousands of square miles of real estate it owns worldwide.
Diving even deeper will produce better results.
Learning about the executives can provide more insights into the companys trajectory regarding profits, innovation and direction.
Another angle is researching the companys intellectual property to determine how it differentiates itself from the competition.
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