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Ideally, you want to own penny stocks in sectors that are growing and expanding when you are Investing in Hot Penny Stocks Online. This is especially true if the stock is a pure play in that sector, as the penny stock will experience a significant increase in share price. For example, when gold doubles in price, the value of the resources owned by junior gold mining companies doubles, which causes their stocks to increase in value.
Many investors wonder how important the price-earnings (P/E) ratio is in evaluating a penny stock. P/E, an important indicator for regular stocks, is the ratio of share price to earnings. In broad terms, the lower the P/E, the better bargain you are getting. In particular, many traders look for a stock with a P/E lower than other companies in its sector. On the other hand, P/E is sometimes not such a key indicator for penny stocks, because so many of these companies have no significant earnings.
Another factor to consider when Investing in Hot Penny Stocks Online is sales growth. If a small company has a track record of several consecutive years of sales growth, there is a good chance the pattern will continue. Experienced penny stock investors look for companies that have achieved 20% to 25% or more growth in annual sales for two to three consecutive years. This type of strong growth is a very strong indicator that future upward growth will continue.
Before You Invest in Hot Penny Stocks Online
Apart from potential strong sales going forward, there are, of course, a number of other factors to consider while forming your decision. Since a lack of cash is often the downfall of small start-up companies, you want to take a good look at the financials of the company you have in your sights. Seeing strong heavy buying from management insiders or institutions is commonly viewed as a good indication of strong growth within the company; it means they know something that tells them the stock is going to rise in price — and it could mean it’s time for ordinary investors like you to put that company in your sights for Investing in Hot Penny Stocks Online.