Stock-based compensation
Definition · Level 10 · Valuation
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Pay given to employees in shares or options instead of cash. It is a real cost to shareholders, paid through dilution, but adjusted figures often leave it out.
Example
Adjusted EPS excludes $0.30 of stock compensation that GAAP EPS includes.
Where Tradecraft teaches it
Level 10 · Valuation, in the lesson “Filings and adjusted numbers”: The 10-K, 10-Q and 8-K, GAAP versus non-GAAP, and why stock compensation is a real cost.
Related terms
- 10-K / 10-Q / 8-KFilings with the US Securities and Exchange Commission: the audited annual report, the unaudited quarterly report, and the current report for…
- GAAPGenerally accepted accounting principles: the accounting rulebook US companies follow in their official financial statements.
- Non-GAAP“Adjusted” figures that strip out items such as stock compensation, amortization of acquired intangibles or restructuring, with a reconciliation to…
- Accretive buybackA share repurchase that raises earnings per share: the earnings yield of the shares bought (EPS ÷ price) beats the after-tax cost of the cash used.
- Accrual accountingRecording revenue when earned and costs when incurred, whatever the date cash changes hands.
- Adjusted EBITDAEBITDA after the company adds back costs it calls one-off, such as restructuring.