Posts Tagged ‘Small Caps’
How to Value a Penny Stock.market Cap !
Written by troy on Tuesday, May 12, 2009 | No Comments
Categories: Uncategorized Tags: Earnings, Pennies, penny stock, penny stocks, Small Caps
So, you want to know how to VALUE a penny stock do you?… Ok then class, we’re about to begin:
Penny shares
The term ” Penny Stocks” ( or Micro’s )simply implies JUST THAT….stocks that trade under $1.00. Now, without getting too technical… from time-to-time certain stocks that once traded in pennies, can breakthrough that IRON CLAD ceiling of $1.00. From here ( $1.00 )….to “usually” the $5.00 level…. you are now dealing with SMALL CAPS ( Small Capitalization ). So… with a PLETHERA of penny stocks to choose from…..how does one PROPERLY place a value upon it’s shares?…..I mean, the VERY reason they’re trading under $1.00 tells us all something….. do you wanna know what that is? Oh….you do?…..GOOD!!! ’cause i’m telling you anyways…..lol…
THEY HAVE NO EARNINGS!!!! NO INCOME!!!! (usually)
So, with that said…. how do “we” compare one to the next to determine whether or not “we’re” getting ripped off? SIMPLE!!!!
MARKET CAP / MARKET CAP / MARKET CAP!!!! ( Market Capitalization )
Once you’ve set your sights on a JUICY penny play….you need to do 3 VERY simple things:
1) Find out the TOTAL ( very important ) number of shares issued and o/s ( outstanding )
2) Take the current price ( the price you see TODAY in the market )
3) Multiply the TOTAL # of shares o/s by the current price.
TADA!!!! You’re done!!!! ( how hard was that?!?! )
example:
ABC Company ( lets say they looking for GOLD…have a property or 2 )
6 million shares o/s
0.30 ( Current Price )
6,000,000 x 0.30 = $1,800,000
Now… the trick is to find another company that does the very same thing ( looking for GOLD ). Apply the same multiple to that company now. Compare the two.
So, with that said… let’s compare ABC Company to:
DEF Company ( also looking for GOLD )
20 million shares o/s
0.55 ( Current Price )
20,000,000 x 0.55 = $11,000,000
UUUMMMM DUH…..Which one is a BETTER VALUE?!?!?!?
YOU’RE RIGHT!!! ABC Company gets my money!!!!!
You see people….
This idea behind the advocacy of penny shares is that low priced shares have more potential to rise, and therefore investors should do their stock-picking by selecting from among penny shares.
The idea is fundamentally flawed. Looking at price alone, without any indication of what value a share has is not meaningful. A share price can only be said to be too high or low relative to earnings per share, assets per share, or some such similar measure.
It is not possible to say what a share ought to be worth without properly valuing it. Once a real valuation technique has been used, the fact that it is a penny share is irrelevant.
The falsity of the idea that penny share are in some way special is evident if one considers that a company can decide whether its shares are penny shares are not by consolidating or splitting its shares.
What little value techniques based on the penny share idea have is attributable to the fact that penny shares tend to be those of small companies and those whose price has fallen from more conventional levels. The former are more likely than large companies to have good growth prospects. The latter are more likely to be recovery stocks
Investors are better off using the more precise technique of screening by market cap to find small companies, and looking at historical data to find recovery stocks.
( now apply what you’ve learned to my previous postings!!! )
Let’s make $$$$ together!!!!
This article was written by placer_foot of Stockhideout.com
Penny Stocks, Stock Picks – SHO
By: rob rens
About the Author:
Penny shares
The term ” Penny Stocks” ( or Micro’s )simply implies JUST THAT….stocks that trade under $1.00. Now, without getting too technical… from time-to-time certain stocks that once traded in pennies, can breakthrough that IRON CLAD ceiling of $1.00. From here ( $1.00 )….to “usually” the $5.00 level…. you are now dealing with SMALL CAPS ( Small Capitalization ). So… with a PLETHERA of penny stocks to choose from…..how does one PROPERLY place a value upon it’s shares?…..I mean, the VERY reason they’re trading under $1.00 tells us all something….. do you wanna know what that is? Oh….you do?…..GOOD!!! ’cause i’m telling you anyways…..lol…
THEY HAVE NO EARNINGS!!!! NO INCOME!!!! (usually)
So, with that said…. how do “we” compare one to the next to determine whether or not “we’re” getting ripped off? SIMPLE!!!!
MARKET CAP / MARKET CAP / MARKET CAP!!!! ( Market Capitalization )
Once you’ve set your sights on a JUICY penny play….you need to do 3 VERY simple things:
1) Find out the TOTAL ( very important ) number of shares issued and o/s ( outstanding )
2) Take the current price ( the price you see TODAY in the market )
3) Multiply the TOTAL # of shares o/s by the current price.
TADA!!!! You’re done!!!! ( how hard was that?!?! )
example:
ABC Company ( lets say they looking for GOLD…have a property or 2 )
6 million shares o/s
0.30 ( Current Price )
6,000,000 x 0.30 = $1,800,000
Now… the trick is to find another company that does the very same thing ( looking for GOLD ). Apply the same multiple to that company now. Compare the two.
So, with that said… let’s compare ABC Company to:
DEF Company ( also looking for GOLD )
20 million shares o/s
0.55 ( Current Price )
20,000,000 x 0.55 = $11,000,000
UUUMMMM DUH…..Which one is a BETTER VALUE?!?!?!?
YOU’RE RIGHT!!! ABC Company gets my money!!!!!
You see people….
This idea behind the advocacy of penny shares is that low priced shares have more potential to rise, and therefore investors should do their stock-picking by selecting from among penny shares.
The idea is fundamentally flawed. Looking at price alone, without any indication of what value a share has is not meaningful. A share price can only be said to be too high or low relative to earnings per share, assets per share, or some such similar measure.
It is not possible to say what a share ought to be worth without properly valuing it. Once a real valuation technique has been used, the fact that it is a penny share is irrelevant.
The falsity of the idea that penny share are in some way special is evident if one considers that a company can decide whether its shares are penny shares are not by consolidating or splitting its shares.
What little value techniques based on the penny share idea have is attributable to the fact that penny shares tend to be those of small companies and those whose price has fallen from more conventional levels. The former are more likely than large companies to have good growth prospects. The latter are more likely to be recovery stocks
Investors are better off using the more precise technique of screening by market cap to find small companies, and looking at historical data to find recovery stocks.
( now apply what you’ve learned to my previous postings!!! )
Let’s make $$$$ together!!!!
This article was written by placer_foot of Stockhideout.com
Penny Stocks, Stock Picks – SHO
By: rob rens
About the Author:
Placer_foot member of StockHidoeut.com Penny Stocks, Stock Picks and Stock Bulletin
General Review On Penny Stocks
Written by troy on Sunday, April 05, 2009 | No Comments
Categories: Uncategorized Tags: Financial Reporting, Nyse Amex, penny stocks, Small Caps, Volatility
Generally, any stock that trades outside the major stock exchanges and also that is taken as depreciatory is known as “penny stock”. These major stock exchanges include NYSE, AMEX or NASDAQ. Sometimes the terms penny stocks, small caps, and nano caps are brought into use without interchangeably. But the rank of the penny stock is determined by share price, not by market capitalization or listing service.
Market caps of penny stock are often less than $500 million. Those that trade on low volumes over the counter take it as highly speculative. It is believed that it may prove hard task to sell penny stocks, once they are purchased. This is because of the fact that it may sometimes be difficult to locate quotations for particular penny stocks. Investors in penny stocks are expected to remain ready to face the possibility of losing their entire investment.
Nevertheless, the penny stock is able to lure new investors with its low price and its possibility to receive speedy profits that may reach up to one hundred percent in certain cases. In a very similar way, there always remains the possibility of severe drops that may even reach over 90 percent in the long term. Penny stocks are considered as investments, in which risk factor is highly involved. Consequently, investors must be aware of the various risks that are involved, such as limited liquidity, lack of financial reporting and fraud.
If liquidity is given prominence, then penny stock has very fewer shareholders. It is less “liquid”; this term means that in comparison to a larger company, it will buy and sell less shares. Any unnoticed change in the demand or supply can result in the unpredictability of stock price. Consequently, it may lead to the rapid rise in the stock price or bring it down to the earth. Therefore, due to the lack of liquidity and volatility, penny stock is more likely to be exploited by management, market markers or third parties. It becomes very tough to sell a stock specifically on a day, when there are no buyers because of the lack of liquidity.
Another reason is that to remain on the OTCBB, the listing requirements are very minimal as compared to NASDAQ or NYSE. Generally, what happens is that those companies which could not make on bigger exchanges or have been de-listed, here they have an opportunity to get re-listed on the OTCBB or Pink Sheets.
Moreover, if compared to major markets, stocks trading on the Pink Sheets hardly have any regulatory or listing requirements. There is nothing to provide protection to shareholders such as accounting standards, change in notification of ownership of shares and so on.
All these features make it easy to use penny stock in any deceitful scheme. However this does not mean that all stocks that are listed on the OTCBB are deceitful. A number of stocks on the OTCBB have fair-trading.
By: Stefan Rockhaus
About the Author:
Market caps of penny stock are often less than $500 million. Those that trade on low volumes over the counter take it as highly speculative. It is believed that it may prove hard task to sell penny stocks, once they are purchased. This is because of the fact that it may sometimes be difficult to locate quotations for particular penny stocks. Investors in penny stocks are expected to remain ready to face the possibility of losing their entire investment.
Nevertheless, the penny stock is able to lure new investors with its low price and its possibility to receive speedy profits that may reach up to one hundred percent in certain cases. In a very similar way, there always remains the possibility of severe drops that may even reach over 90 percent in the long term. Penny stocks are considered as investments, in which risk factor is highly involved. Consequently, investors must be aware of the various risks that are involved, such as limited liquidity, lack of financial reporting and fraud.
If liquidity is given prominence, then penny stock has very fewer shareholders. It is less “liquid”; this term means that in comparison to a larger company, it will buy and sell less shares. Any unnoticed change in the demand or supply can result in the unpredictability of stock price. Consequently, it may lead to the rapid rise in the stock price or bring it down to the earth. Therefore, due to the lack of liquidity and volatility, penny stock is more likely to be exploited by management, market markers or third parties. It becomes very tough to sell a stock specifically on a day, when there are no buyers because of the lack of liquidity.
Another reason is that to remain on the OTCBB, the listing requirements are very minimal as compared to NASDAQ or NYSE. Generally, what happens is that those companies which could not make on bigger exchanges or have been de-listed, here they have an opportunity to get re-listed on the OTCBB or Pink Sheets.
Moreover, if compared to major markets, stocks trading on the Pink Sheets hardly have any regulatory or listing requirements. There is nothing to provide protection to shareholders such as accounting standards, change in notification of ownership of shares and so on.
All these features make it easy to use penny stock in any deceitful scheme. However this does not mean that all stocks that are listed on the OTCBB are deceitful. A number of stocks on the OTCBB have fair-trading.
By: Stefan Rockhaus
About the Author:
Article by Stefan Rockhaus. For further detailed information on penny stocks visit Penny Stocks Investor – More resources at Mega Info Spot