Apple, Amazon, and Google were at one point cheap stocks. Do you want help investing your money in the next Apple before the valuation explodes?
If so, you’ve come to the right place.
Cheap stocks with increasing value do exist. They just take time to find. We’ve done the work for you and included a four-step strategy to help you find cheap stocks that will go up in value.
How to Identify Cheap Stocks That Will Go Up
Cheap stocks that will go up in price are often referred to as undervalued stocks. These are stocks with a high potential valuation, but they are currently cheap because the popular majority hasn’t realized this potential.
Generally, cheap stocks will be under $50 a share. Here’s a list of the top stocks under 50.
There are other ways to identify cheap stocks, starting with a stock screener.
1. Use a Stock Screener
Stock Screeners are online shopping tools for the stock market. Stock screeners allow investors to filter stocks in the market by their own defined criteria. Criteria can include something like annual sales growth of 15%.
These screeners are available on popular search engines like Bing and Yahoo. They do generally cost a fee but can save you from investing money in fruitless stocks.
2. Use the P/E Ratio to Find Stocks
The P/E ratio is the price-to-earnings ratio. The P/E ratio is a tool to find undervalued stocks. Undervalued stocks are always cheap, but not all cheap stocks are undervalued.
Some cheap stocks will not grow, and in that case, you earn what you’ve paid for. The P/E ratio is calculated by dividing the current share price by annual earnings per share.
The lower the price-to-earnings ratio of a stock, the higher its value.
3. Look Into Penny Stocks
Penny stocks are stocks with a value of $5 or less per share, with some stocks under $1. Penny stocks are hard to find since they are not published in major trading spaces like NASDAQ and often involve the risk of price manipulation.
Before investing in any penny stock make sure to do plenty of research on the company. Many companies are guilty of “pump and dump,” in which they sell fraudulent stocks.
You can also work with a trained investor to prevent losses. The key to finding the best penny stocks is to use a screener, assume any stock is a scam until proven otherwise, and verify their claims.
4. Go for Large Capitalization and High Growth
Market capitalization is measured by the current share price multiplied by the number of shares issued. Generally, a higher market cap means a higher valuation.
Growth rate is also a prime indicator of a company’s value. You can look into a company’s future earnings’ growth, revenue growth, or compare their rearview growth since their formation. A 10% annual growth rate is solid, and a 20% growth rate is very high.
Finding Valuable Stocks
The main strategy to successfully invest in valuable stock is research. Understand the market and the reputation of a company before investing, and you’ll find cheap stocks that will go up.
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