Researching Penny Stocks


Researching penny stocks thoroughly is vital if you are to sort the winners from the losers. Let’s look at a number of different ways you can research penny stock companies.

How Many Employees Does a Company HaveHow many employees a company has is a good indication of it’s seriousness and long term commitment to the market. A start-up company may be able initially to pay staff in shares but it will soon need to pay cash to more junior staff to grow the business. And for cash it needs more than commitment but real orders and cash flow.

Look At The Company’s SuppliersA company supplying the company you are researching will almost certainly have done their own research on the company as to its credit worthiness, etc. Establish if the company you are researching is in good standing and pays its bills on time, etc.

Remember, if a reputable supplier is happy to supply your company this is a good indication that it is operating on a sound footing.

Talk To CustomersFind out how long customers have used the product or service of your company and whether they are satisfied or not. Are they good at communicating, what is their follow up service like, etc. You could even pose as a potential customer yourself or where possible actually buy their products and make your own assessment.

Look At The CompetitionList your penny stock company’s competitors and get in touch with them. Try to assess the general state of the market and how they think they are fairing.

Is the market big enough for multiple competitors or will your company struggle? Ask the competitors about the company you are considering investing in and whether they are familiar with it. How do they rate your company?

Check With The Relevant Trade BodiesIs your company a member of a relevant Trade Organisation or body. Usually such bodies have criteria that must be met to qualify for membership. How long has your company been a member? Have there been any complaints or positive feedback?

These are important question that you must ask when researching penny stocks. It takes a little effort but the information is readily available and a this kind of research done upfront will reap benefits if done well.

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