Multibagger Stocks: Multibagger stocks are shares that give manifold returns compared to their initial investment. For example, if an investor bought a stock at ₹ 100 and it reached ₹ 300, he would be called ‘Three-Bagger’. If the same stock turns ₹ 1,000, it becomes a ‘ten-bag’.
Why are multibagger stocks special
Multibagor -making stocks usually come from companies that are trading at low valuation at that time. But their fundamentals are strong. These include good management, scalable business model and strong corporate governance.
However, these stocks do not give returns in one night. Time, patience and research are necessary for them. Today many veteran companies have made crores of investors rich in this way.
How to identify multibagger stock?
Finding multibagger stock is not very difficult. You can find out on some special points and find out whether a stock has the ability to become a multibagger or not.
1. Company with low debt
Companies that have a date-to-equity ratio less than 30% are considered financially stable. Low debt means that interest pressure on the company will be low, which may increase profits. This is a sign of trust for investors that the company may also survive in crisis.
2. Recent quarterly performance
If the company’s latest quarterly reports show continuous growth at the operational level, then it is a positive sign. If the value of that stock is still considered less in the market, then it may be underwellized. Such stocks have the ability to become a multibagger over time.
3. Understanding of Revenue Model
It is important to know how the company earns money and what is the scope of its business. If the company is in a sector whose demand is increasing, then its revenue will also be more likely to increase. A stable and scalable revenue model forms the basis of the company’s long -term growth.
4. Valuation Indicator
Matrix like P/E (Price-to-Araning) and P/S (Price-to-SALS) show how expensive or cheap stock is. If these ratio are improving but the share price is still not increased, then there may be a possibility of growth in stock. Getting good financial growth on low valuation is an important sign of multibagger.
5. Look at big changes
Reports of changing management, new strategy or large capital investment are considered important in the company. These changes can give a new direction to the company’s performance and increase the trust of investors. Multibagger stocks often see similar turnaround stories.
Which investor is for multibagger stock?
- Long -term investor
- Consciousness to wealth creation
- Compounding benefits
- Those who want to add high-civil elements to the portfolio
Keep these things in mind
The larger the multibagger stocks can give, the greater the risk is also hidden in them. Therefore, deep research, understanding of valuations and patience are necessary before investment. Walking with a hurry or crowd can be harmful here.
Especially, in the desire for multibagger returns, investing in a penny stocks or weak fundamental stocks. In this, instead of getting strong returns, your hard earned money can drown.
Disclaimer: Here information provided is being given only for information. It is necessary to mention here that the investment market in the market is subject to risks. Always consult experts before investing money as an investor. There is never advice to anyone to invest money on behalf of Moneycontrol.