Blue Sky Potential

There are many listed companies whose shares trade for prices ranging from cents to dollars that fit into one or more of the following categories:

• The company doesn't yet have a saleable product.
• The company is making a loss.
• The company has never made a profit.

You'll find examples of these types of companies among:

• mineral and oil exploration companies
• biotechnology or medical companies researching or developing a new vaccine or medical treatment
• industrial innovation companies developing a new product
• computer technology companies developing software or new computer hardware.

And the list goes on ...

Shares in these types of companies are priced by the market according to what is known as 'blue sky potential'.  The market factors expected future profitability into the share price, and so companies not currently making a profit may still have a high price if the market anticipates that future profitability may occur.

Tip

It is risky to buy shares in a company whose shares are priced on blue sky potential.

Also read:

Green Packet Announces 10th Consecutive Quarter Of Losses!

Update on Green Packet