Things to remember while applying for an IPO

An IPO stock is an investment in general, so you have to consider most of the secondary market analysis here too. Since the public forums have not enough information, you should check out the prospectus of the IPO shares carefully or discuss it with a share market expert. Here are a few factors that you need to check before applying for an IPO investment:

You should check out whether the growth rate is sustainable or not. Higher earnings growth reflects in higher P/E valuations, thus makes earnings critical. Any valuation (P/E ratio) assigned to the company in the present-day must be justifiable in terms of the future earning prospects in the coming 3 to 5 years.

Certainly, one would want to invest in a company that has enough fame but with limited revenue and elusive profits. Unless the revenues and profits are expected in the coming years to foster the valuation, investors may not be too amused about that company.