The Right Price

When buying any stock, we're always interested in getting a good price, and in the case of buying small-caps, "price" is often the critical factor in a winning investment. But what is a good price? To determine if a stock is at a good price, we need to look at its relative value to its peers. To do this, we can compare various ratios, like price-to-sales, price-to-earnings, price-to-book, and other metrics. Depending on the industry and stage of growth, certain ratios can be more important than others. You can look at research reports on peer companies to see which ratios analysts put more importance on for the specific industry you are looking at. By doing the extra homework, you'll be in a better position to determine if you're getting a good price.