All;
When reading company filings, I notice the “Basic weighted average number of shares” vs. “Diluted weighted average number of shares” and in some cases, the two numbers differ a lot.
What is the difference of the two numbers? Which number makes more sense to use when evaluating an investment?
Thanks.
-M
Hi M,
I notice the “Basic weighted average number of shares” vs. “Diluted weighted average number of shares” and in some cases, the two numbers differ a lot. Which number makes more sense to use when evaluating an investment?
You want to use diluted. Those include “potential” shares from options and incentives that have been awarded but not yet realized, and chances are they will be turned into shares at some point. It’s especially important for tech companies and young growers, which often to use options as a form of compensation. Otherwise you’re going to end up with an inflated EPS figure.
Neil
Neil
Thanks a lot.
-M