way to Find stocks with more profit potential

Find stocks with more profit potential

http://articles.moneycentral.msn.com/Investing/SimpleStrategies/FindStocksWithMoreProfitPotential.aspx

Don't buy a stock until you know its potential and set a target price. I'll walk you through a simple, 5-step process, using Oracle as an example.

By Harry Domash

Most money managers wouldn't consider buying a stock until they've set a target price, and neither should you.

Your target price is the price you think a stock will hit at a specified future date. It determines your potential profit. It's the reward half of the risk-reward equation.

Suppose, for instance, that you are researching a stock currently trading at $25 per share. You'd probably be more inclined to buy the stock if you thought it would be changing hands at $50 to $60 this time next year than if you thought it would be trading in the $20-to-$30 range.

Developing my target price consists of five steps:

•Estimate sales in the target year.

•Estimate the number of shares outstanding in the target year.

•Use the results from steps 1 and 2 to compute estimated target-year sales per share.

•Estimate expected range of price/sale ratios.

•Use No. 3 and No. 4 to compute the estimated target price range.

http://articles.moneycentral.msn.com/Investing/SimpleStrategies/FindStocksWithMoreProfitPotential.aspx

Find stocks with more profit potential