There are a number of factors used to select the best penny stocks. Here are a few:

1. Cash Flow - You need to understand that these are typically new and emerging companies and need cash if they expect to stay in business. Sounds simple but many people overlook this. Best penny stocks are ones with plenty of cash flow otherwise there is not much room for speculation.

2. PE - Price to earnings ratios are also an important factor when choosing the best penny stocks. This is investing 101 info but some people feel it is difficult to calculate a true PE for a penny stock that fluctuates so much.

3. Low PEG - The best penny stocks will usually have a low Price/Earnings/Growth factor.

4. Management - Its not easy getting a penny stock company off the ground. It’s going to take some wise management. You can say the best penny stocks have the best management.