How to Assign a Value to the Best Penny Stocks

By Chad Kettering
When trying to assign a value to a penny stock, one of the factors to look at is the cash per share that the company has. The cash per share is a public number you can find by going to an online finance site or within a brokerage account you may maintain. By looking at the profile of a reporting company, you should be able to see how much cash per share the company has. Many companies that are struggling still have large cash reserves from previous operations.

Let's use the example of ABC Corporation, a small electronics manufacturer. ABC's current strategy may be faltering because of a recent loss of a big contract. Although ABC no longer has that particular contract, it maintains a $2,000,000 cash reserve from earnings derived while servicing that contract. The $2,000,000 could be used to secure additional contracts to increase its earnings. The cash reserves could be used to start another business or to acquire an existing business. Cash is the most valuable asset a company can have due to its liquidity. If ABC Company has 1,000,000 shares outstanding, it would have cash per share of $2. Many companies in this situation are trading for under their cash value since investors ignore the cash at hand and just focus on the short-term situation of the company. The experienced investor knows that company is an attractive acquisition candidate. Any acquirer can buy the company for $1 and use the cash per share for further business ventures. It would be like going to the bank and withdrawing $10,000 for only $5,000.

Another valuation method is to value a company by the multiples of sales it sells for. This is called sales per share, which is simply the sales of a company divided by the number of shares. At $1 sales per share a $2 stock is selling for twice its sales. Compare that number to other stocks in the same industry and see which stock sells for a lower sales multiple. The stocks with the lower sales multiple would be considered a better value according to this method. Now, many of the best penny stocks do not have sales so you may have to use alternative methods such as book value, PE ratios, market cap and the size of the float to help determine a company's stock value.

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StockProfessors.com is a website that profiles stocks of interest. We are not licensed brokers or financial consultants. Please be advised that the information contained may or may not be complete and is solely for informational purposes only. This is not to be construed as an offer to sell, hold or the solicitation of an offer to buy. Investors are encouraged to seek opinions by their registered brokers or financial advisors after extensive due diligence is performed.


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How to Pick the Best Penny Stock

By Rohan Smith

There may be a wide choice of penny stocks in the market throughout the year but proper learning and understanding would help one pick the right hot penny stocks at the right time in order to gain the highest profit. Hasty decisions might land you in losing money.

Buying OTC stocks is a very risky affair. One has to put great effort in order to pick the best penny stock, hence reduce the risk of losing any money.

One must consider many factors while calculating a good pick. One can use their own ways to pick a good stock or even do market study of the companies regarding their growth, history and campaigning. It is very important to study about an industry before buying a particular stock. The behavior of the stock is directly related with rise and fall of the industry.

Whereas if you able to get some information about the company before it hits the news stand, then there are a wider chances of making more gains. Like if you get know that the company is planning to launch a new product and number of investors would increase then without any further delay you can buy these stocks as it would definitely fetch you more income. There are many websites that provide  Stock Newsletter on various stocks of the day. Subscribing to them can also keep you updated on the latest developments in the Market.

The performance of the stock would also help you in deciding whether to buy it or not. If you feel the performance is improving or falling down you can take a decision on these grounds whether to purchase a particular stock or not.

Lastly the most important factor we must consider is to see how successful the stock is in the market. If the consistently going up then it is right investment or the right pick.
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