How to Analyze Penny Stock Company’s Management Quality?
Each annual report of the OTC company contains an introductory speech of its management. The team shares the information on the work done over the past year. Although this appeal to investors does not contain specific information about the results achieved by the company in recent years, attentive investors can learn a lot from it.
To do this, we advise you to pay attention to the following points:
How specific is the information in the management comments?
Do managers discuss the significant financial growth of the company over the past few years, or are they trying to justify the failures that have befallen the company during this time?
How clear are these comments to you? If you are trying to mislead with the help of big words and financial jargon that you do not understand, you are most likely trying to hide something from you.
Do the managers mention potential risk or uncertainty in moving forward?
Sincerity in the company’s financial report is a very important point for any investor. This topic became especially relevant after the well-known events, when not only investors, but also the economy as a whole suffered because of the false financial reports of some companies.
If the company provides sufficient information in its management analysis, it is likely that the management truthfully shows the real situation of the company at the present stage.
On the other hand, if the company’s report does not contain information about any problems that it is currently experiencing, this should cause alarm among investors. We advise you to stay away from such company. An example of such a situation is the analysis of management, indicating the stable position of the company, which, however, has large amounts of external debt, which at any time can lead to bankruptcy.