[PennyPlayer]

This is just one of many ways in choosing the company that fits your investment needs.

We'll also share with you other factors we include in this process.

Revenue Growth of 30% or more, quarter over quarter. Simply have a look at the amount the company is bringing in from sales. Since companies may have stronger quarters than others due to seasonal influences (retail department stores will have stronger sales during Christmas than say the spring or summer months), it is important to calculate quarter over quarter increases. When a company reports their financials, you will normally find they will make it easy for you and show last quarter's results right beside this years. Simply calculate the increase in revenue. If it is not growing by at least 30%, move on.

Earnings Per Share Increase, quarter over quarter
Simply compare this quarter's EPS and divide last year's EPS. If growth is over 30%, you have something.
Look for companies who's growth is meaningful. EPS of 2 cents this year is a 100% increase over 1 cent. You're looking for meaningful growth.

How is the company's financial health?

The "debt/equity ratio" shows how much a firm has borrowed long-term as a percentage of its stock equity. The lower, the better. Ideally this ratio should be no more than 30%.

How has the stock performed?

Investors need to know how a stock has performed relative to all other stocks. Generally they attempt to hold the market's top-performing securities -- those that have done better over the past year than the majority of stocks in their industrial group and all stocks in our database. Look for a positive trend in the 12-month, 6-month and 3-month periods. This is called Relative Strength and you should be looking at least 90% (meaning the company has performed 90% better than its peers).

Current Share Price?

The human perception in investing must never be misunderstood. People have a natural tendency to want to purchase a higher number of shares of a cheaper company than a lower number of shares at a higher price.

How many times have you heard people say that they were going to buy a stock after it split because the shares would be cheaper? Why buy 50 shares of Nortel at $100 when I can have it at $50 after the split and buy twice as many shares? The lesson learned? Even though it takes a stock the same amount of effort to double at $5 as it does at $50, there are normally more buyers ready to buy a cheaper priced stock. This is why we like stocks that are priced between $2 and $20. Yes we do have a few exceptions in the list, however, these are also the foundation stocks in our portfolio. These companies are not going to go belly up next year and will continue to grow regardless of how the markets play out.

If there are more buyers, it is easier for sellers of the stock to ask for a higher price because the law of supply and demand dictates the higher the demand, the higher the price. If you are holding onto a $2 stock, it will move up quicker if there are many buyers because the perception that paying $2.50 versus $2.00 is not a big deal, despite the fact that it is 25% higher. This is like buying a $50 company for $62.50. Not many people would think this to be a good deal. Also, if there is a lot of good news reports, the stock will fly quicker.

Although you should never turn down a great stock because of it's price, take a look at Nortel and the fall it took. Never underestimate the market's perception of things.

Shares Outstanding / Insider Ownership
Everyone should have a basic understanding of the law of supply and demand. That said, the fewer the shares outstanding, the more your shares will be worth if the company releases good news. When good news hits, everyone wants a piece and is willing to pay more for it. Look for inside ownership (management) and institutional ownership (mutual fund companies, brokerage houses etc) owning at least 40% of the shares.

Yahoo finance is normally good at providing those stats for you. If the owners of the company do not own a large amount of the company, how much faith does that show in the company they have? If institutions do not know about your company, the pressure required (interested buyers wanting a lot of shares) to move the share price higher will not be there.

We like stocks that have under 40 million in outstanding shares. The fewer the better. I know of a company who's insiders owned 75% of the shares. When the company released good news, the share price flew! Some companies to look at are ones who ideally own 20% or more of the company
Revenue Growth, Qtr over Qtr of over 30%
Earnings Per Share growth, Qtr over Qtr of over 30%
Debt to Equity Ratio of less than 30%
Net Profit Margin of over 10%
Stock Price under $20
12 month relative strength of more than 90%
Insider Ownership greater than 20%

When our screen provides too many choices, we narrow it down by looking at the following:
Does the company have a daily average volume of more than 40 000? If the answer is low, than it is too illiquid, therefore, not enough shares to get out if you need to sell.
Price to Earnings Ratio: The lower the better. If you have to choose between 2 stocks, choose the one with the lower price to earnings ratio.
Take a look at its chart. Remember, the trend is your friend. If the stock is moving up, you'll want a piece of that action. If it has been moving down, there is likely a reason for that!
Market Capitalization. The current market value of all of a company's shares outstanding. To calculate market value, you take the number of shares outstanding and multiply them by the current price of each share. You can find information about shares outstanding from the company's last quarterly report or any online quote service.
For instance, if a company has 10 million shares outstanding and trades at $13 per share, the market capitalization is $130 million.
Market Cap. =Shares Outstanding * Share Price
=10 million * $13 = $130 million
We like companies with a smaller market capitalization. Take a pass on companies where the market cap is more than $250 million.

I will continue this at a later time. This is just my opinion, do your own research and let me know what you come up with?

PennyPlayer