Measuring Stock Performance: A Guide to ROI

Measure stock performance with ROI.

There are two main ways to invest in a company: through debt or equity. Debt represents a claim against the future earnings of the company, whereas equity represents ownership and is purchased with shares of stock. The most common way to calculate stock performance is with the measure ROI (return on investment). ROI looks at investment earnings compared with the original cost of the investment.

Step 1

Determine the original stock price. This is the price of the stock when you purchased it. Let's say you purchased the stock for $50 per share.

Step 2

Determine the current or ending stock price. The ending stock price is its price when sold, say, at the end of the year for tax purposes. Let's say you are considering the sale of your stock, but want to know its performance first. The current value of the stock is $60.

Step 3

Determine the stock's earnings. This is the difference between the ending (or current) price and the original purchase price. The calculation is: $60 - $50 = $10.

Step 4

Calculate the stock's performance. Divide the stock's earnings by the original amount paid. The calculation is: $10 / $50 = .20, or 20 percent. This is your return on investment.