Is It Legal to Invest in Pot Stocks?
It is legal to invest in pot stocks on any of the exchanges. You can also invest in OTC or pink sheets marijuana stocks, but you have to be careful with them. States keep legalizing the use of cannabis. As of April 2022, 37 states have legalized medical marijuana, and 27 have approved adult recreational use. New York and Virginia were legalized in 2021. The pot stock sector is extremely volatile and is known for pumping and dumping. Gurus on Stocktwits and Twitter are quick to shout buy this and buy that. Be careful. You’re also probably wondering how to determine the value of a company's stock. To value a stock, we use the price-to-sales ratio (P/S), which compares a company’s stock price to its revenues. First, it indicates the value placed on each dollar of a company’s sales or revenues. Secondly, it’s a valuation tool that tells you how much investors are willing to pay per dollar of sales for a stock. To calculate the P/S ratio, we divide the stock price by the company’s sales per share. What results is either a low ratio or a high ratio. A low ratio could mean the stock is undervalued. Alternatively, a higher-than-average ratio could indicate that the stock is overvalued.