Shares outstanding refers to the total number of shares of a company's stock that have been issued and are held by investors, including insiders and institutional holders. Diluted shares outstanding includes the effect of stock options, warrants, and convertible instruments — this is the correct figure to use in stock valuation.
A company with an enterprise value of $10B, net debt of $2B, and 200M diluted shares outstanding has an intrinsic value per share of ($10B − $2B) / 200M = $40. Using basic shares instead of diluted shares would overstate intrinsic value in stock valuation.
Using the wrong share count inflates or deflates the per-share intrinsic value in stock valuation. As companies issue stock options and convertible instruments, the fully diluted share count can differ significantly from the basic count. Ignoring dilution is a common beginner mistake.
MiniValuator uses diluted shares outstanding — auto-filled from the latest financial data — to convert enterprise value into per-share intrinsic value in its DCF stock valuation output.
Ready to apply this concept? Try the MiniValuator DCF Calculator — calculate intrinsic value for any US stock in under 60 seconds.
