How To Identify Multibagger Stocks Early?

🔷️ Stock that can become 5x/10x/ 20x/50x in the 5, 10 to 15 years can be termed as MULTIBAGGER STOCKS

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🔷️So here are few things that a Multibagger stock should have

1. MANAGABLE DEBT OR DEBT FREE

The company should be debt free in their inception stages as well as in their growth stages. You cannot just allow your profits to be taken away by in form of Interest outgo.

Any company which has low or no debt has a very good chance of becoming a multibagger.

Growing companies can be overwhelmed with growth and can borrow aggressively for expansions but it can be a tangle if they cannot pay off in time or growth numbers are not inline with expectations.

2. HIGH ROE & ROCE

ROE is Return on Equity and ROCE is Return on Capital Employed and so any stock can become multi bagger if they have high return on equity and if they can generate good returns on the capital employed.

If a company invests 100 Rs and can generate 10 as profit has more chance of being a multibagger than company that can generate 9 Rs on the same 100 Rs invested. It means businesses that are capital intensive have fewer chances of being multibaggers.

3. LOW PE RATIO

Company available at a lower price to earnings (low PE) and as they generate more consistent earnings will have PE expansion and can get higher PE ratio providing much better returns for investment.

Low PE ratio is not the only criteria but consistent earnings with low PE ratio has a better chance of being a multibaggers very soon.

4. FUTURE GROWTH POTENTIAL

Any business should be able to increase capacity and still generate similar profit. Company should be in a sector that is not too small to grow further for the company.

Companies like Reliance Industries or Bharti Airtel cannot grow further in their own sector and need sectorial diversification.

5. MARKET LEADER

The company should be market leader in whatever they are doing on a smaller scale and should be able to make that on a large scale over time.

The focus of the company should not be on profits but on increasing revenue and growing market share.

6. ETHICAL & CLEAR MANAGEMENT

The most important factor in identifying multibaggers is to invest in companies with Ethical management.

No ratio can help you find if the company’s managment is ethical and the best way to find out is to read companies reports in the worst times.

Once things were bad, did they deploy tricks to increase the price of their share so that they can pledge their stake in the company?

7. EXPERIENCE

The management should have experience with the current business. This does not necessarily mean they should be a public limited company trading for years but they should be in the business for an elongated period of time.

Disc – All Views expressed are personal and for Study & Educational purpose only. Consult your financial advisor before investing.We are not sebi registered.