Hot Penny Stock Picks

Hot penny stock picks are hard to make money from after someone has told you about them as its often already too late and the stocks have made their move! You want to find out about them before they move so you can ride the wave upwards.

One way to determine which hot penny stock picks will have the greatest chance of making you money is to start by looking the company’s financial statements.

These statements will show the overall financial health of the company, by detailing how much money the company owes and owns and a record of the company profits and losses over a given period.

You can also see how much the position has changed since last time the company reported and this can give you an idea of the future direction the company is heading in and whether they pose a good investment prospect.

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By learning how to read the basics of a financial statement this will help you to identify which penny stocks will be hot tomorrow and which ones to avoid. Looking at financial statements however does not factor in any impact of unexpected news which could influence the movement of the share price but it provides you with a good starting point.

Reading A Company's Financial Statement

So where do you start when analysing a company’s financial report? A good place to begin is by looking at the balance sheet.

Balance Sheet

The balance sheet will show a company’s financial position at the specified date; it lists what the company’s assets are i.e. what the company owes or has owing to it and the liabilities which are what the company owes or needs to pay back.

You can also assess the shareholder’s equity which represents the excess of the assets over the liabilities and is often referred as to as the book value.

You work out what the book value is by taking away the liabilities from the assets and the remainder of the value is what is owned by the shareholders.

By looking at the balance sheet you can also assess the debt load and the cash position.

Earnings Statement

The next step is to look at the earnings statement which will show you how much revenue the company received during the year from the sales of its products and services and the expenses the company incurred due to wages, taxes, etc.

The difference between the two will tell you whether the company made a profit or a loss for the specified time period. The amount that is left over after taxes is what is referred to as the net earnings and this result is basically telling you how much money the company really made.

Statement of Change

The last thing to have a look at is the statement of changes in financial position which shows the change in the company’s finances from one year to the next. This can give you an idea of the liquidity of the company as well as the company’s ability to repay debts etc.

It is best to look at many different companies as this can give you a better idea of what a good financial statement looks like compared to a not so good one.

Although the share price is influenced by many other external factors other than the financial position of the company it can help provide a good starting base help you find the hot penny stock picks of tomorrow!

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