While best penny stocks could make you rich, the worst ones could also make you broke, just like every investment does. In this article, you could read about qualities to buy penny stocks in the market. If you decide to buy penny stock, reading these steps could help you in arriving at the best deal later on.
1st: You need to go after high PE as this is a good indicator of the best penny stocks. PE stands for Price Earnings ratio reflects roughly how much each investor would have to pay per share for the profit produced by the company. Such is calculated by dividing the price of the stock by the Earnings per Share figure. You should know that such calculation is one of the most commonly used one in the trading world, hence, you definitely have to find a way to familiarize it.
2nd: Low PEG or Price-Earnings-Growth is also a good factor to look at when seeking for best penny stocks. In here, you have to produce the data on the Price-Earnings ratio and then divide that based on the analyst’s projected per share over the next 2 to 5 years.
3rd: Penny shares and other shares in general is another essential factor that you have to consider. This could be a little practical but a lot of investors may tend to overlook this aspect. You should keep in mind that even penny shares are so cheap a slight price rise may still give huge loss in profits.