We have mentioned a number of times that penny stocks are the most volatile stocks and contain a higher amount of risk. We have received many emails from our readership wondering how to find good penny stocks and how to minimize risk with these small cap stocks.
There are some specific tips and tools to find the value of a stock and check whether its undervalued or overvalued. To find undervalued stocks takes some time and effort but at the end of the day, you will be rewarded for the time spent.
Compare Analyst Values with Current Stock Price
Hot penny stocks are usually priced lower than the value evaluated by analysts and experts, but this is not always true as even experts and analysts can be wrong sometimes. To avoid that risk we will also mention some more tips by which you can check the value of a stock on your own. Search out a stock which is priced higher by most of the analysts and decide a right time to enter the market. Stocks also surges mostly just because of analysts’ predictions, so be smart so you can make a solid profit.
Price To Earnings Ratio
Price to Earnings Ratio can help you to find the value of a Top Penny Stocks and you can check whether the stock is undervalued or not. This ratio will help you see what is the price of a share given the yearly earnings of the company. The lower this percentage is, the better the chances that the stock is a solid investment. If this ratio is extremely high, because this could be sign of a market bubble that is almost ready to burst. A very low number can indicate an undervalued stock.
Debt to Equity Ratio
Debt to Equity Ratio can help you to find undervalued penny stocks. If a stock has a low debt to equity ratio, it is very possibly undervalued and values more than the market price reflects at this time. This equation is very helpful in finding hot penny stocks that are a solid investment, and weeding out unsuitable stocks in companies that carry high debt.
Check Financial History Of The Company
The financial history of all companies that you are considering should be investigated and researched. Look back at least 5 years, if possible, but this is not available in every case. Make sure to go back at least four quarters and preferably more. Even if the stock is an IPO, previous company data should be available from before the company went public. If the stock price is low compared to historical price data, and the considerable value of the company is still the same, the Best Penny Stocks may be undervalued and can be a smart Investment.
I know you may be thinking that this is too much work and its hard for new person who doesn’t have a strong financial background to calculate all these ratios and check all these factors. At activepennystock.com will do all this research for you and find the undervalued penny stocks for you.
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