Many among you who have started investing into stock market or planning to do so holds a dream to become millionaire or in Indian way crorepati someday,
But the truth is only one who has patience, practicality and does regular analysis for him these three things over the time creates LUCK which turns into bagfull of returns.
But the truth is only one who has patience, practicality and does regular analysis for him these three things over the time creates LUCK which turns into bagfull of returns.
Dear investors this must be understood firstly that no share turns into multibagger in a year
Even if somebody is telling you that xyz stock is going to be a multibagger then chances of happening that are almost negligible because world is mean when it comes to money. Nobody is going to give anyone real formula to earn handsome amount of money so easily
Then it has to be you and you only who must dig out such opportunities for yourself.
So let us move to our topic how to find a multibagger stock?
Unlike of the 10 to 15 years ago when not much data was available so easily to understand a particular share thoroughly but situation has changed by now
Now there are lots of sites like moneycontrol, investing, screener etc around on internet which provides lots of data regarding stocks easily, freely and more in elaborated way.
As of now India is much developed than it is some 15 to 20 years ago. If you look around you will find some of the core industries have grown substantially so one now must understand this clearly before investing. Even some of the stocks are way above than it's intrinsic value ( it is considered as true value of a share which is derived from different methods considering cash Flow, future growth, dividend, liabilities, profit etc)
For a multibagger there are numerous aspects which must be studied and analyzed which have been traditionally inherited from one investor to other.
1. IDENTIFICATION OF INDUSTRIES HAVING FUTURE OPPORTUNITIES
So first thing before start looking for multibagger stock first analyze the current time frame and what will be the possible future. Depending on that Identify the sectors which will be on driving seat in near future. Once you have identified the sectors try to relate to it depending upon your knowledge and liking because until and unless you relate with the share you will not be able to analyze it's true potential. Categorize these shares upon their products find which product will have more demand in future because demand is directly proportional to the companies growth.
2. MANAGEMENT AND FUTURE PLANS
Managements interest towards shareholders is most important and it gets reflected by timely disclosure of shareholders related data, dividends and other notices if a company is doing so then it can be assumed company have a good transparent working.A firm with a transparent corporate policy shows the managements approach and dedication towards future plans and commitment towards growth. past record of the management needs to have in mind also.
Bad management will simply use the company's asset and exposure for self enrichment. This will ultimately drag the company into more and more debts.
3. KEY FIGURES AND RATIO
Categorize shares considering their last 5 years profit and how much debt on them?
Next thing is look onto is
NET PROFIT - Profit earning shows company have good demand for its products.
DEBT - long period large debt driven companies even if have large turnovers can not be multibagger because either its business model demands large capital or simply it has a bad management and policies. so low debt and debt free companies generally go on to become multibagger.
EPS ( earning per share) - how much profit company generating for one equity share. positive EPS shows profit making firms.
DIVIDEND and POSITIVE NET CASH FLOW generated over the year shows the success of the business model
These are some of the basics figures that has to keep in consideration other than this there are few more figures which to be considered are book value, face value , share capital of company(less share capital and high profit goes on to become a multibagger.)
4. LESS ASSET BASED MODEL
Generally companies which requires large capital investment and capital goods should be avoided as these are generally heavily debt driven and also to fulfill their capital requirement investors wealth gets ruined. Software companies requires less capital asset and generate high profits
5. CASE STUDY OF A MULTIBAGGER
finding a multibagger stock search is incomplete without case study of multibaggers. understanding why some the companies became multibagger is most important then only thorough understanding of the subject can be gained.