An Introduction to Multibagger Stocks

Every company whether it is a mere startup or a branded business, focuses on growth and development. Issuing stocks to investors is one of the best ways to increase your brand and company name. 

 

Stocks are the best path to attract more customers and investors in the company. Different companies issue different kinds of stocks. Let us read what multibagger stocks are? And which companies can issue multibagger stocks? Also, learn about the types of stocks and differences between them. 

 

If you are someone who is interested in investing in stocks, we also have the strategies for you to select the right company who can issue the multibagger stocks.

 

 

What are Stocks?

 

Before understanding the meaning of stocks. First let us clear the meaning of stocks in mind.

 

Stocks in simple language may be defined as securities to the financial assets. These securities represent an ownership share in the company. Companies and organizations in order to grow their business and raise the investment in them. 

 

The value of stocks fluctuates throughout the day. Sometimes it ends up doubling the original amount and sometimes it doesn’t even leave a single penny.

 

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Types of stocks

 

Companies categorize stocks by size, industry, geographic locations, and style. Broadly stocks are classified into two types.

 

1. Common stocks: These stocks have potential for higher long-term returns.

 

2. Preferred stocks: These stocks though have lower long-term returns. But they have fixed and guaranteed dividends. 

 

Read more - Types of Stocks

 

Examples of some prominent stocks

 

Here is the list of the examples of stocks depending upon its types:

 

1. Growth stocks: For example, Amazon and Facebook.

 

2. Value stocks: For example, JPMorgan Chase and Intel.

 

3. Blue-chip stocks: For example, Unilever and AT&T.

 

Now let us come to the multibagger stocks.

 

Read about virtual reality stocks, casino industry stocks and silver stocks.

 

 

What are Multibagger stocks? 

 

Stocks are also classified on the basis of their return value. If a stock doubles its original investment value, it is called a two-bagger. If it returns 10 times the original price, the stock is called a 10-bagger. And those stocks which raise multiple times their initial investment value are called multibagger stocks.

 

Multibagger stocks may be defined as the stocks that give several times their invested costs. The companies that offer multibagger stocks have high fundamentals and strong corporate governance.

 

 

How to identify multibagger stocks?

 

Now the question might pop up in your mind, how can you differentiate multibagger stocks from other stocks. Here are the following strategies from which you can identify multibagger stocks:

 

1. The company offering the multibagger stocks has a limited debt level. According to ballpark level any such level should not exceed more than 30 percent of the equity value.

 

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2. The revenue multiples of the company are the mirror of its performance. If you are thinking of investing in stocks, keep a check on the company's performance on a quarter-by-a-quarter basis. 

 

And do remember that consistency is far better than intensity. Even if multiples are low, but the company’s performance is at an operational level, it indicates that the company has noteworthy potential.

 

3. To identify the multibagger stocks and their potential, it is important to check the earning sources of the company. It is essential to know about its revenue numbers and the means by which the organization is making profits or money. The number of scalable operations of the company is directly proportional to its potential of giving multibagger stocks.

 

4. Do proper research and check on the company's annual and quarter reports. Do check its business model, capex, structural and management changes.

 

5. Along with the mentioned four points, don’t forget to calculate the trailing 12-month EPS and revenue. This will help you in estimating the current PE and price/sales ratio. If the PE level is growing more rapidly than the stock price, the chances of companies to serve multibagger stocks are higher.

 

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Which are the companies most likely to generate multibagger stocks?

 

Unlike other stocks, multibagger stocks are not easy to generate. A company should have high discipline and potential to generate multibagger stocks. And that’s obvious too, a multi-fold return is something that requires a lot of effort. Only the companies possessing following qualities can offer multibagger stocks to its customers.

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Characteristics required for a country to issue Multibagger Stocks

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Advanced research

 

The company must invest a noteworthy amount in its research and development section. This will help in delivering quality products, and thus satisfying the customers. It will further assist the company to enlist its securities in the stock exchange as multibagger stocks.

 

Developed skills

 

For the reason mentioned above, the company should hire skilled employees and should conduct their training and development programs to possess multibagger stocks.

 

Brilliant management skills

 

The company must have brilliant management skills both financially and productivity. With efficient management, proper flow is maintained in the production and sales chain. Efficient management skills also help in revenue maximization. 

 

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High growth

 

The potential of a company to issue the multibagger stocks can be estimated by looking at its performance. Companies having high annual profits and limited debt liability are more likely to generate multibagger stocks.

 

High PEG

 

In order to issue multibagger stocks the company must possess a high price to earnings growth ratio.

 

Aggressive pricing strategies
 

Aggressive pricing strategies and entry restrictions can help the company to control its total revenue generation. These companies can further increase their profits by issuing multibagger stocks. 

 

Which are the top multibagger stocks in 2021?
 

According to an economic Times report, the following stocks are deemed to return up to 400 percent of the original price by the end of 2021. So, if you are thinking of investing in the last two months of the year, Mentioned below are the best options for you:

 

Also read about, Best companies to invest in 2022

 

Happiest Mind

 

Last year the company, Happiest Mind, delivered a solid return of percent. This year the company is predicted to return around 427 percent of the original value.

 

Tata Elxsi

 

Tata Elxsi is expected to return up to 212 percent of the price by this year.

 

Balaji Amines

 

Balaji Amines, as of June 30, has estimated a return growth of 300 percent.

 

Apart from these, companies like HFCL and Deepak Fertilizers are two heavy retail stocks that have seen a gain of 159 and 183 percent respectively in their investment returns. Sonata Software, Tata Motors, Tata Chemicals and Navin Fluorine international have also delivered return stocks up to 100 percent.

 

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What are the advantages of the Multibagger Stocks?
 

The Multibagger Stocks have the following advantages over other kinds of stocks.

 

High earnings

 

Multibagger stocks multiply the returns to multiple times than the original invested value.

 

Increased dividend

 

Because of high returns multibagger stocks increase the dividend income on the investment amount.

 

Strong financial management skills

 

The companies offering multibagger stocks indicate the strong financial management skills.

 

Low debt level

 

The companies offering multibagger stocks have low debt to equity ratio.

 

High potential

 

Multibagger stocks have high potential as compared to other stocks such as double-bagger stocks and 10-bagger stocks.

 

Multibagger stocks are one of the easiest ways to multiply your return amount multiple times. It also helps in increasing the dividend value for the investors. But before investing in a company, investors should undergo a brief research related to the company. Investments are always subjected to market risks. But if invested with proper research and precautions, stocks like multibagger stocks can return a good amount.