Nasdaq vs OTC Markets Which Outperforms?

When it comes to investing in stocks, there are two main options for trading publicly listed companies: Nasdaq and OTC Markets. Nasdaq is a highly regulated stock exchange that is known for hosting some of the largest and most well-known companies in the world. On the other hand, OTC Markets are decentralized and allow for trading of smaller, less established companies. Both markets offer unique opportunities for investors looking to diversify their portfolio and take advantage of different investment strategies. Ultimately, the choice between Nasdaq and OTC Markets stocks depends on the individual investor's risk tolerance and investment goals.

Nasdaq or OTC Markets?

When comparing Nasdaq and OTC Markets, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between Nasdaq and OTC Markets.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. Nasdaq has a dividend yield of 1.17%, while OTC Markets has a dividend yield of 1.35%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Nasdaq reports a 5-year dividend growth of -12.74% year and a payout ratio of 55.27%. On the other hand, OTC Markets reports a 5-year dividend growth of 12.54% year and a payout ratio of 97.65%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with Nasdaq P/E ratio at 48.05 and OTC Markets's P/E ratio at 23.11. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Nasdaq P/B ratio is 4.16 while OTC Markets's P/B ratio is 13.27.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Nasdaq has seen a 5-year revenue growth of 0.38%, while OTC Markets's is 0.72%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Nasdaq's ROE at 8.80% and OTC Markets's ROE at 70.24%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $79.95 for Nasdaq and $53.49 for OTC Markets. Over the past year, Nasdaq's prices ranged from $54.54 to $83.77, with a yearly change of 53.59%. OTC Markets's prices fluctuated between $45.00 and $60.16, with a yearly change of 33.69%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.