I think many of the answers here are correct, yet are broad generalizations. I wouldn't focus so much on the stock price itself, but rather the market capitalization of the company. To find that you take the total shares outstanding and multiply it by the stock price. This will give you a better idea of whether you are talking about a "fly on the wall" type of company or something more substantial. The smaller the company, the riskier (or less proven) it is. Focus on the important metrics of the company: cash, debt, profitability, and market opportunity. If you don't like what you see there, then you shouldn't be a buyer regardless of the stock price. In many "penny" stocks (especially those sub $1) you won't find much cash, you will find plenty of debt, and you'll likely find a story of how revenues will come - yet haven't).