How to Evaluate Stockholders' Equity
- 1). Obtain a copy of the balance sheet. With a publicly traded company, get the information from the company's website. You can also get financial statements from the U.S. Securities and Exchange Commission. Publicly traded companies are required to update these financial statements every quarter.
- 2). Calculate stockholder's equity using the information from the balance sheet. You will usually find a listing on the balance sheet that clearly details the amount of stockholders' equity. You can also calculate the figure by subtracting the company's liabilities form its assets. The remainder is the stockholders' equity.
- 3). Divide the total stockholders' equity by the number of outstanding shares; use the figures from the company's financial statements. This calculation determines the equity per share.
- 4). Compare equity per share to stocks of other companies in the same market. A company with a higher equity per share than similar companies is typically a good sign for investors. If the company has a lower equity per share than other companies, it does not necessarily mean that you should not invest in the company; it is only one point of comparison to use when making investment decisions.