SBC (Stock-Based Compensation)
The cost of shares a company gives employees instead of cash — a non-cash expense that reduces earnings and dilutes shareholders' stakes.
SBC intensity = stock-based compensation ÷ net income × 100 (per the quality metrics on the stock detail page)
Up to about 30% of net income is generally viewed as fine, and above that as worth watching.
In plain terms
Companies sometimes pay part of an employee's compensation in "shares of the company" rather than cash. From the company's side, the value of those shares is a labor cost — an expense (SBC).
What's unusual is that no cash actually leaves the company. Instead, new shares are issued and handed to employees, so the stake existing shareholders hold gets a little thinner. This is called "dilution."
What it tells you
SBC is used heavily by growth companies, especially in IT and biotech. When SBC is large, the structure can be one where "accounting profit looks fine, but shareholders' stakes keep getting diluted." It's an item that separates the quality behind the headline profit.
The "adjusted earnings" a company presents separately are usually calculated with this SBC excluded (making them look better). So knowing SBC tells you what was excluded from that adjusted figure.
Formula
SBC intensity = stock-based compensation ÷ net income × 100 (per the quality metrics on the stock detail page)
What high or low means
Up to about 30% of net income is generally viewed as fine, and above that as worth watching. It means a large share of earnings is supported by an expense that isn't cash.
If a company gives no stock compensation to employees at all, this item shows as "not in the filing."
Because no cash goes out, SBC isn't counted as an expense in free cash flow (FCF). So looking at FCF alone can make a company appear to generate more cash than it really does. At companies with large SBC, "whether the share count rose (dilution)" stands in for that missing expense.
If a company reports "adjusted operating income" with SBC excluded, margins can look better than they are. The figure differs depending on whether the emphasized profit is the accounting-standard one or an adjusted number.
The SBC amount is the size of the expense; how much shareholders' share has been thinned shows up in the change in share count. Some companies offset dilution with share buybacks, so the change in share count shows whether that offset happened.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see SBC alongside the sector benchmark.
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.