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Nightly Topic Post. Tonight we discuss what

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Garyst Member Level  Monday, 11/19/12 09:25:08 PM
Re: None
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Nightly Topic Post. Tonight we discuss what does the phrase Market Cap mean? A stock's "Market Cap" is determined by the current pps and the total # of Outstanding Shares (OS) that particular company has. Lets say stock ABCD has 1 million shares OS and they are trading at $1.00. That creates a Market Cap of one million Dollars (In essence what the company is liable for). Then we must look at what that particualr company has in earnings/revenues. Lets say that earnings are $100,000.00 that PPS would creat at Market Cap of 10 times earnings. That would creat a PE (Price to Earnings) of 10 to 1. The higher the Market Cap gets the less likely there is the opportunity to support the current pps until higher earnings/revenues come in.

With tha above said...... that is mainly true for Dow/Nas and Amez stocks. Investors look at the PE in determining to invest or not. That would be called trading on fundamentals.

When it comes to Pennies; most do not trade on fundamentals but rather momentum. So, when you see some on the Boards post that the pps of a Penny can't go up any higher as it has say a PE of 40 times earnings or even higher and 200 times earnings that can be false. Many that invest in Pennies do so on momentum and not fundamentals.

Hope this makes sense and helps you out.

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