5 Steps to Finding Low Price Stocks to Buy
Investing in stocks is one of the best ways to grow your money. As they’re normally on the rise, they can help add value to your otherwise stagnant funds.
If it’s your first time delving into the stock market, then you may be hesitant to invest in the more expensive ones. While this is understandable, you can still reap good financial benefits with the help of cheap stocks.
Here to help you out is a guide on how to find low price stocks to buy:
How to Find the Best Stocks for Cheap
Step 1: Find a Stock Screener
A stock screener is a tool that can help you find products according to your preferences. This is available on most online stockbroking websites and related platforms such as Yahoo! Finance and Kailash Concepts (KCR). For quantamental research tools including stock screeners, you may check out KCR.
You can put any feature you wish to have, say, an annual sales growth of about 5%. As you work your way through the market like a Wall Street exec, you can gradually move to advanced screeners that provide better customization.
Step 2: Set a Target
If you’re looking for a good company to invest in, then look at the growth rate of the organization. Those that grow fast are considered more valuable, so you should start with such institutions.
You can target these companies by screening the company’s growth rate for future earnings. As a beginner, a safe start is 10% over the next five years. You can always increase this to 15% or even to 20%, which is considered by most to be very high.
If the screener can’t search for companies according to future earnings, then choose the sales growth option. Again, go for companies with growing revenues that come with your desired growth rate.
If your screener still doesn’t have this option, you can take a look back in the last five years. The company’s growth and sales for the last few years can help you determine the company’s viability.
Step 3: Consider the P/E Ratio
Now that you have an idea of the best organizations to invest in, it’s time for you to search for a business with cheap stocks.
More than just considering the price, you should look for something that offers the best value for your money. You want something worth all the effort you are putting.
To analyze the value of such, divide the current share price with the annual per-share earnings. You’ll arrive at a figure known as the price-earnings or P/E ratio.
Needless to say, the lower the price-earnings ratio, the cheaper the company. So, if the P/E this year is 20 and it was 30 last year, know that you’re getting a good deal right now.
When you use your screener, add this criterion. A result of 16 is good enough for beginners.
Step 4: Check the Market Cap
When you put all the criteria stated above, you’ll come up with cheap companies that can earn well in the future.
If you find the results too overwhelming, you can filter the companies according to size. You can do this by looking at the organization’s market capitalization. The smaller the market cap, the riskier it is for you.
While larger caps are always available, they are often seen in businesses that have a $10+ billion value.
If you still have a long list despite all the filters, you can trim it down by doing any of the following:
- Increase the growth rate, like from 10% to 15%
- Check for the trading within the 52-week low point. This will help you remove the companies that are currently ‘sour.’
- Go for organizations that pay dividends, as this is a good determiner of financial stability.
Step 5: Research
Now that you have a more manageable list, the next thing you need to do is learn more about the stocks you have chosen.
Here are some questions your research needs to answer:
- Why is the stock so cheap, given that it’s attractive and yields a high growth?
- What is the company all about? Will it do well in the long term?
- What is the management like? Are these officials aligned with the organization’s stakeholders?
- What is the state of the company’s balance sheet and other finances?
By answering these pressing questions, you can help create a diverse portfolio.
Remember, investing in the market is just the beginning. You need to protect your money by evaluating the company’s earnings.
Should you wish to invest more, create an account with a broker that excels in screening and research. With the help of professionals, you can make the most out of your penny stocks.
What are the Best Cheapest Stocks to Buy Right Now?
While penny stocks have long earned a bad rep, you can find something that does well. Here are some examples:
Motus GI
Motus GI is a medical technology corporation that provides endoscopy solutions for people with gut conditions. Based in Florida, it is famous for its Pure-Vu device, which helps clean the colon in preparation for a diagnostic procedure.
Motus GI is one of the most affordable to buy at 74 cents apiece.
KushCo
This company distributes branding solutions and packaging supplies throughout Europe, Canada, and the US. Its products include glass containers, pop-top bottles, and vaporizer cartridges, among many others.
It offers fairly cheap stocks at 84 cents each.
LiveXLive Media
As concerts may not go live anytime soon, LiveXLive Media is one of the companies that have benefitted from this.
Formerly earning by digitizing concerts, the company now focuses on live streaming quarantine concerts. This has helped bump the organization’s revenue by a whopping 15%.
Even with its continued growth, it comes with a cheap stock price of $4.25.
Identiv
This tech company has become wildly popular because of its pandemic products.
Apart from selling smart and touchless card readers, it also offers a body temperature patch and contact tracing software. These offerings have helped boost the company’s revenues by about 13%.
The Identiv stock price costs an affordable $4.53.
Now that you know how to find low priced stocks to buy, it’s time to get started right away! Although the market is still in recovery, investing in penny stocks right now may do you well in the long term.
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