Multibagger Stocks – Definition, Benefits, Identification Techniques & more
Let us begin by the meaning the word Multibagger Stocks. Breaking off the word multibagger, it is an amalgamation of two different words i.e. many and bags.
If you pour in your thoughts on the breakage, you would have an idea of the meaning of Multibagger Stocks in India. Stocks which provide a multi fold yield, as in many times are referred to as Multibagger.
You do not simply earn handsome returns, you earn higher than usual returns over these stocks. It is because; such stocks have the probability of rising manifolds.
What are Multibagger Stocks?
In simple terms, Multibagger Stocks are the ones which give multiple of returns, than they cost.
Prices of such Multibagger Stocks India keep multiplying, increasing their value two times, three time, and even ten times.
Moving on to the types of stock which are considered to multiply in value, they are the undervalued ones.
Companies that are stable and have strong financial background are considered as the best investment options. Especially the ones which are operating at prices, lower that their fundamentals.
Companies which are operating at low prices, but have a scalable business, that could increase and multiply in short time are the multiibagger shares.
How to identify a Multibagger Stock?
We have our share of knowledge we would like to lend, and so here is how to identify a Multibagger Stock.
Debt Ratio more than 30%
Companies that keep their debt ratio below the acceptable one, generally have a high chance of resulting out to be multibagger stocks.
The ratio varies as per the industry, the particular company belongs to. So, while computing the ratio, one needs to be well aware of the acceptable industry standards.
For an overall analysis, it mustn’t be more than 30% of the equity.
Monitor Quarter Results of Company
Company’s finances from previous quarters must be closely monitored. The multiple may be declining, but if the operations are performing in a great level, it is your call.
It lets you assume how much of a potential the company has in growing and multiplying, in future likely intervals.
Revenue from Operations growth
Revenue check is general, but there is a thing from other source of company’s income. If you witness the revenue from operation grow in a greater pace, there lies your clue.
Also, you may scale the company’s operations and determine its future potential.
PE & Price to Sales Ratio
This is more of a metric related identification. You need to precisely fetch the current PE and price to sales ratio. This can be done by taking into account the 12 months ratios.
Now, if you find the PE ratio upward shift to be in a greater pace as that to its stock price, it is probably a multibagger. The chances are higher here, actually.
Structure of Company
Also, the structure of the company is to be taken into account. It is because any sharp or swift changes in the structure of the company, may lead to the hindrance of company’s operations.
Annual or quarter reports most likely disclose any such information.
Benefits of Multibagger Stocks
Now, let is consider the Multibagger Stocks Benefits. It is general to want to have a keen knowledge of advantage associated, so here they go.
Also, they prove to be great reasons for which you must invest in multibaggers.
Better return on equity
Investment ideas are associated with steady and possible return, fair enough. In a way, multibagger stocks yield higher than usual returns.
Such returns are way above the average return threshold and the holders are highly benefitted. High returns and profits are a fashion well witnessed here.
Investments with such stock would take up on the growth levels pretty soon.
Advantage of opportunity created
This is in correlation with buying an object on sale. The potential of the items does not decrease, but the value in market does.
Same goes with stocks, where the stock market outgrows and does not discover the potential of the company.
So, when the prices are on the lower levels, you have the discounted rate price, where if you make a buy, you will reach full potential by holding onto it.
Getting high potential stocks in low prices is really an opportunity created.
Game changers
Consider such stocks the game changer, if you wonder why, we have the right explanation for you.
Such companies have to potential to go through failures and still stand erect. It is a matter of some structural change requirements, which would turn the story upside down.
The price undervalues the company, but any possible change, would bang in higher prices for the company stocks.
Likewise, higher growth potential and profits would result for the investors.
Multibagger Stocks – Conclusion
Here is a closure on the Multibagger Stocks. It is quite general now, to have perceived it in a profitable way. it for sure is, but, this doesn’t change the fact that, right decisions cannot be taken in a swift.
One has to take all such rightful measures, to identify which of the stock are multibagger stocks. Stocks in the market are many, and so are low priced stocks, but they assuredly aren’t multibagger stocks.
You need to be efficient in selection, and after brief examination you must select the potential multibagger stocks. Following this the investment can be made.
Multibagger Stocks FAQs
Ques – Why do we call it – multibagger stocks?
Answer – Multibagger stocks are basically those that gave multiple returns then their actual costing. The amount of such stocks keep multiplying over time and increase their value to two, three, four and sometimes ranging up to a solid 10 times.
Ques – How to identify and invest in multibagger stocks?
Answer – The companies that keep their debt ratio below an acceptable face usually have a tremendous chance to result out and be a multibagger stock. The companies finances from earlier quarters must also be looked at pretty closely. If the multiple looks like it’s declining, but the operations are somehow managed, the choice lies with you. This would allow you to presume what potentiality the company has when it comes to growing and multiplying.
Ques – What are the benefits of investing in multibagger stocks?
Huge returns on equity.
Tremendous advantage over others when it comes to discovering new opportunities.
Potential to go through failures yet stand unwavered.
Ques – What are the examples of multibagger stocks?
Answer – Mishra Dhatu Nigam, MAS Financial, Ultramarine & Pigments, Deepak Nitrite, etc are a few examples of multibagger stocks.
Ques – Where can I find multibagger stocks of big investors?
Answer – In order to do so, you need to monitor the earnings per share or EPS and the price multiple of the specific company. A comparative evaluation of P/E multiple along with the industry average and all the other peers in the market will give you a particular answer as to whether the stock is undervalued or overvalued.
Ques – What decides a stock is a multibagger stock?
Answer – Whichever stock provides a multifold yield, as many times as possible, or simply refers to as multibagger. Here in, you earn higher than usual returns. And that is only because these stocks have the probability of rising and multiplying many times.
Ques – Why there is less risk with multibagger stocks?
Answer – Let’s face it, multibagger is basically an equity stock that provides you with a return of more than hundred percent. The stock which shows a multiple value addition to its initial investment would seldom provide a huge amount of risk associated with money.
Ques – Where can I check PE ratio of multibagger stocks?
Answer – If you are searching for the PE value for any index, what you can do is visit the national stock exchange website and on the search field, make sure you enter the dates that you’re looking for, after which you will be provided with the latest PE value of the market.
Ques – Where can I check price to sales ratio of multibagger stocks?
Answer – PE Ratio= Stock price per share/earnings per share. You can very easily find the data in order to calculate the P/E ratio on the national stock exchange website.
Ques – Where can I check performance of all multibagger stocks?
Answer – You can find out the performance of all the multi-bagger stocks in the market by visiting the NSC/BSE stock exchange or Bloomberg website.
