How to choose multibagger stocks ?

What is multibagger stocks?

- A multibagger stock is an equity stock which gives a return of more than 100%.

Everyone wants to invest their money in multibagger stocks so they can create wealth very fast. But they don't know how to choose stocks that could be multibagger stocks.

So here we have some parameters where you can find out multibagger stocks.

1. Sales Growth
Compounded sales growth should be at least more than 10 to 12%. It shows company has the ability to sustain in the market or not.

2. Net Profit Margin
Net profit margin should be consistent compare to the company average.
How profitable the company is, as compared to its peers.

3. Gross Profit Margin 
Gross profit margin should be consistent as compared to the industry average.
It shows how effectively the company is managing the costing of raw materials.

4. Debt Level
Debt level should be low or nill.
If company has higher debt than they should payback with interest it will effect the profit.  Should have regular cash flow from the operating Activities.

5.current ratio
Working capital determines the difference between the current asset and current liability.  The current ratio is the ratio of current asset and current liability.  It should be in the range of 1.5 to 5

6. ROE, ROA and ROCE
ROE:NI/ Shareholder equity
ROCE: EBIT/ Capital Employed
ROA: NI/ Total Assets
These three must be higher and consistent.

7.Pledge
Pledged should be 0%. Some company's pledges shares percentage is high than that company have slower growth or no growth.

8. Promoters Holding
If higher the promoters holding than higher the chance of management on the company, if promoters are continuously increasing their holding company have higher potential in future growth.

9.Margins
Margin is also very important parameter. If 2 company have same income. Then how would you identify better performer? By margins.

10. Scope
The company you are investing in should have potential scope in the future.


If you covered these parameters you can easily find out multibagger stocks.