![]() It is now very cheap but has had no revenue growth over the past five years and does not look to have made a profit in this time frame either. The company must have done many things very badly to lose over 97% of its value. IFRTF hit a price high in 2017 of 30 cents per share and has lost over 97% of its value in 3 years to 2020. Google has averaged a 26% gain for the last five years to 2020. International Frontier Resources (Ticker: IFRTF) has a share price of $0.01, which sounds cheap compared to one of the highest-priced stocks on the US stock market, Google (Ticker: GOOG), priced at $1482.83.īut just because IFRTF has a stock price of 1 cent does not make it cheap, nor does Google’s stock price make it expensive. People take the same ideas about bargain hunting from the real world into the stock market. This is where most beginners in the stock market look first. In this section, I will share research that proves this point. Avoid Choosing Stocks Based on Low Stock Price.įinding cheap stocks based on a low stock price alone is a recipe for disaster the stock price itself is meaningless. ![]() Avoid relying solely on stock price to determine undervaluation combine it with other criteria. To identify cheap or undervalued stocks, consider future earnings, asset valuation, discounted cash flow, fair value, and the margin of safety. A dishwasher might be cheap because its manufacturer uses inferior materials and labor to undercut the competition, and the product may be a poorly designed, low-quality piece of junk. A Ferrari might be cheap because the seller wants a quick sale it might cost $50,000, but relatively, that might still be a bargain.Ī washing machine might be cheap because the demand for washing machines has dropped, and the manufacturer needs to get rid of surplus stock and lower the price. This remains a common blunder made by novices in the field.Ī stock might be cheap, depending on what you are looking for.Īnything might be cheap, based on several reasons. While the stock price may be modest, it seldom reflects a sound value proposition. However, penny stocks of this nature typically entail considerable risk for the investor. Many inexperienced investors seek out low-priced stocks, often priced below $5. Small-cap stocks (stocks with a lower market cap than large-cap stocks) are often considered cheap stocks, as they typically have less liquidity and carry more risk. Investors may also consider the stock’s market capitalization or the total dollar value of all outstanding shares in a company. Investors use measures such as future earnings, asset valuation, and price-to-earnings (P/E) ratio to determine whether a stock is undervalued or overvalued. A stock can be considered “cheap” if its price is below a company’s true value or potential future earnings. The stock market has no single definition of a cheap stock. How long should I hold onto a cheap stock?.Can cheap stocks become expensive stocks?.Can I day trade with cheap penny stocks?.Are cheap stocks listed on major exchanges?.How can I reduce risk when investing in cheap stocks?.What are the risks of investing in cheap penny stocks?.What should I consider before investing in cheap stocks?.What is the best software for finding cheap stocks?.Summary: Are Cheap Stocks Good Value for Money?.Try Buffett’s Fair Value & Margin of Safety Strategy Find Value Stocks Using Discounted Cash Flow Find Bargain Stocks Based on Asset Valuation Find Stocks Based on Past & Future Earnings Avoid Choosing Stocks Based on Low Stock Price.
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