Real value in penny stocks leading to profits is not found in they hype. How to learn the difference

The hype in penny stocks is everywhere making investments in this market very risky. It is the nature of the market. As investors move to buy the next hot stock, its price rises quickly, then falls, few realizing the profits from the rush of those buying driving shares higher and higher. The fall to the earth is quick as investors move to the next hot stock.

It is my belief that penny stocks with real value can be identified using the following criteria.Those of you who follow my hubs will see I am continuing to use APNX as a study, demonstrating what I percieve as value to consider when investing in penny stocks. My definition of penny stocks at this point are stocks under a $1.00.

1. The company must have a viable product or service. This is determined by a companies sales. If a company shows yearly sales improving on their financial reports, one can say there is a market for the companies products or services. Real Value yes

eg: APNX financial data, Quarterly sales are good, indicating yearly sales over $20 million. Current price of APNX is $.11 a share. A $20 million dollar company at $.11 is undervalued.

Annual Data | Quarterly DataAll numbers in thousandsPeriod EndingOct 31, 2010Jul 31, 2010Apr 30, 2010Jan 31, 2010 Total Revenue 5,172 4,823 5,053 5,070

2. Value is found when a companies outstanding shares are considered medium. Outstanding shares are those the company issues including free trading and restricted stocks. In fact. many penny stock companies issue up to 1 billion shares or more. I consider medium quantity of outstanding shares to be around 100-500 million, You will find great information about stock share structure at http://www.pennystocknation.com/stocksharestructure.html Real Value, Yes

3. Review the stocks history to verify highs and lows of the stock over a period of time. Has the price been higher than it is now? when was it higher? How long was it at the higher price. This shows patterns and if the share price is lower with positive financials, sales figures etc. there is a good chance the share price wil once again reach the high price in the past

4.  Does the company have a net profit over a year.   With traditional stocks profit is usually factored in the price before the announcement.   Companies who meet projections fare well, if not price drops.   Penny stocks normally do not have any expectations.   Their profit isn't factored in.   APNX has had a successful year realizing net profits.   Real value yes.

5.  Look for increased interest in the stock.  Is the trading volume moving up as the price stabilizes or moves in a positive direction.   There may be value yet never realized if there is no interest in the company.   When there is no interest, the stock price falls as market makers love to make their money on the small trades of $.01 or more daily.  They don't really care if the price moves higher.   Investors on the other hand do care.   It is their buying and selling that moves the stocks price.

6.   Compare the penny stock to other companies with sales and profit in the same range as the company being considered for its value.  Many times you will discover share price considerably higher and you will wonder why?  My belief is you found treasure that at some point others will want.

This isn't a tried and tested, at least not yet, method to find value.  I welcome your input.