The percentage change could be, for example, the year-to-date (YTD) percentage change, the change since the trader started the position, or the change so far in the trading day. Let’s take a look at an example of how percentage change can be used when looking at Netflix. Say Netflix closed at $603.35 one session and by 3 p.m. the next trading day, was trading at $636.47, up $33.12. Through virtually any trading platform, an investor could see at a glance that Netflix shares were up 5.49% at 3 p.m. This percentage change was calculated (automatically by trading platforms) by subtracting $603.35 from $636.47 to get $33.21, then dividing by $603.95 and multiplying by 100. Depending on an investors’ buying strategy, they may want to buy or sell shares depending on that price movement.
How Percentage Change Works
Calculating percentage change is fairly straightforward with these steps:
Step 1: Determine the original stock price and the new price.Step 2: Calculate the amount change by subtracting the original price from the new price.Step 3: Divide the change by the original price. Step 4: Multiply by 100.
Percentage change works simply by giving investors a quick look at what a stock’s movement means in the context of the whole price of the stock. We divide by the old number because percentage change is meant to show how much the stock price has changed relative to the former price. This way we know at a quick glance how significant the change is and we can more easily compare the change from, say, year to year or company to company. Let’s explore another example of percentage change with Netflix stock, only this time with a year-over-year percentage change from Sept. 28, 2020, to Sept. 28, 2021. First, you can use a trading platform or online tool to find the two prices. The original 2020 price was $490.65 and the new 2021 price was $583.85. Next, you can calculate the change over the time period by subtracting $490.65 from $583.85 to get a change of $93.20. Finally, divide 93.20 by 490.65 and multiply by 100 to find the percentage change, which is 19%. So, for that year period, Netflix shares increased 19%. Investors can then compare that figure to how Netflix performed in the past, how its competitors are performing, and how the broader market is performing, among other uses.
Other Types of Percentage Change
Aside from share prices, stock investors can use percentage change when looking at other key financial figures of a public company. For example, Netflix used percentage change in its second-quarter 2021 letter to shareholders: So, with percentage change, investors can see that the rate of revenue growth may be slowing, even when revenue is increasing. And they can use that information, along with other metrics, to help them with their investing decisions.
