How to Calculate Net Income Based on Stock Price

How to Calculate Net Income Based on Stock Price
Net income is the profit a company generates during an accounting period.

Step 1

Visit any financial website that gives stock information and find a company’s P/E ratio, price per share and number of shares outstanding, which is information that a financial website provides for all public companies. For example, assume a company’s P/E ratio is 12, its price per share is $20 and it has 1 million shares outstanding.

Step 2

Substitute the values into the P/E ratio formula: P/E ratio = price per share/(net income/shares outstanding). In this example, substitute the values to get 12 = $20/(net income/1 million).

Step 3

Multiply both sides of the equation by the right side’s denominator. In this example, multiply both sides by (net income/1 million) to get 12 x (net income/1 million) = $20.

Step 4

Divide the company’s P/E ratio by its total shares outstanding. In this example, divide 12 by 1 million to get 0.000012. This leaves 0.000012 x net income = $20.

Step 5

Divide the company’s stock price per share by your result to calculate its net income over the past 12 months. In this example, divide $20 by 0.000012 to get approximately $1.7 million in net income over the past 12 months.