What is a share of stock? Many investors don’t understand the concept of a stock in the stock market. To buy a share of a company, you should understand what you’re buying in to. One share of a company is one piece of a company. To understand this concept better, we can think of a stock as a really tiny company by itself. Using Apple stocks are our example, we shrink Apple by 5 billion times because that’s how many shares there are. Dividing their market cap by 5 billion, we get $170. Think of that $170 as the price of a really tiny Apple company, and you’re buying the whole company outright. That one tiny company earned $9 in the past year and if you sold the whole thing, you’ll get $27 in return. So would you buy that tiny Apple company? That’s why it’s important to use this comparison. We can compare these simple numbers to other companies like Microsoft stocks, and Facebook stocks. Comparing these simple numbers, we see Apple is the better value stock. Not using this tiny company, Apple’s actual numbers are 850 billion in total worth, 45 billion earnings, and 135 billion of worth if sold. It’s much easier to think of each stock as a tiny company. Valuation numbers like P/E Ratio and P/B Ratio all uses this concept by comparing the price of one stock to the earnings of one stock, and comparing the price of one stock to the book value of one stock. If you wouldn’t buy tiny apple at $170, you shouldn’t be buying a share of their stock at $170.