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Spireframe Software, makers of Value Investor - the easiest way to learn stock analysis and valuation of stocks. Spireframe Software, makers of Value Investor - the easiest way to learn stock analysis and valuation of stocks.  
Capitalization Rate
Net Earnings / Average Shares Outstanding 
 Capitalization Rate =
 Market Price of Common Stock

Explanation of Capitalization Rate:

The Capitalization Rate measures the rate of return on one share of company stock by comparing the earnings per share to the price of one share of stock.

Importance of Capitalization Rate:

A high, or increasing Capitalization Rate is usually a positive sign, showing that the company may be able to provide a healthier return for its stockholders.  If there have been changes in the stock price, other reasons should be investigated as to why these changes occurred.

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