SBC (Stock-Based Compensation)
The cost of stock a company gave employees instead of cash — a non-cash expense that eats into profit and dilutes shareholders' stakes.
In plain terms
Companies sometimes pay part of an employee's wage in "our own stock" instead of cash. The value of that stock is, from the company's side, a labor cost — an expense (SBC).
The unusual part is that no cash actually goes out. Instead, by issuing new shares to give employees, the stake existing shareholders hold gets slightly thinner. This is called "dilution."
What it tells you
SBC is used heavily by growth companies, especially in tech and biotech. Large SBC can mean a structure where "accounting profit looks fine but shareholders' stakes keep getting diluted," so it is essential when weighing the quality of headline earnings.
The separate "adjusted earnings" a company touts are usually computed with this SBC excluded (to look better). So knowing SBC tells you what that adjusted profit left out.
Formula
SBC intensity = stock-based compensation ÷ net income × 100 (basis of the quality metric on the stock detail)
What high or low means
Up to about 30% of net income is generally read as fine, larger than that as worth watching. It means a large share of profit is propped up by a non-cash expense.
If a company gives no stock compensation to employees at all, this item shows as "not disclosed."
SBC does not go out as cash, so it is not counted as an expense in free cash flow (FCF). Looking only at FCF can make a company seem to generate more cash than it really does. For companies with large SBC, look at FCF together with "whether the share count rose (dilution)."
When a company reports an "adjusted operating profit" excluding SBC, the margin can look better than it really is. You need to check whether the earnings it highlights are on an accounting basis or an adjusted figure.
More important to shareholders than the SBC amount itself is "how much the share count actually rose by it (dilution)." Some companies offset dilution with buybacks, so look at it together with the change in share count.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see SBC and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.