Multibagger Stocks Meaning – How to Find?

Do you know what Multibagger stocks mean? If you are an investor or stock trader, then you may hear the phrase “Multibagger Stocks” many times during your trading journey. Therefore, I researched this topic and came up with detailed information about Multibagger stocks in the stock market. So, if you want to explore more about it, then keep reading this critical post. 

What are Multibagger Stocks?

Multibagger stocks are the equity shares issued by the companies that give multiple times higher returns than the cost of its acquisition. The multibagger shares or stocks have a higher potential to obtain tremendous growth, have excellent management and effective production tactics. It also shows the excellent research and development abilities of businesses or companies who issue these shares because it generates higher demand in the stock market. 

Example Of Multibagger Stocks

You have understood the meaning of Multibagger stocks. To get more clarity about this essential term, let’s also look at some of its crucial examples. While discussing Multibagger stocks, every trader should know about Uniply Industries because its shares gave 1400 percent higher returns to its shareholders in 2015.

Similarly, Caplin Point Laboratories gave a 22,300 percent higher return (within ten years) to its shareholders in 2020. la Opala RG is also one of the promising companies because its shares also achieved a secure place in the list of top Multibagger stocks. As its shares provided 4500 percent higher return in previous decades. 

You should also know about Garware Technical Fibres because its share also offered 2600 percent additional return within ten years. So, now you can see how profitable it can be if you invest in Multibagger stocks. But you also need to focus on some essential terms to determine the right Multibagger stock for trading. 

How to Find Multibagger Stocks?

Multibagger Stocks Meaning

Before you invest in Multibagger stocks, you also need to understand how to analyze which stock is a Multibagger stock. For this, I have mentioned some of the crucial things that you can measure while selecting any share for you. 

1. Check Out The Debt Level Of The Company

Before you choose an equity share to trade or make an investment decision, you should check out the debt value of the company. The standard percentage of debt value can be different from one industry to another. But as a thumb rule, the debt value should not exceed the 30% value of equity shares. 

2. Analyze The Performance of The Previous Quarter

It is always better to check the previous quarter to analyze whether the company’s share can be a Multibagger share or not. You can check its revenue multiples and its low, but the company is running its operational activity successfully. Then its share has higher chances to have an upside trend. 

3. Check The Price Multiples and Earnings

You should also check out the EPS for the last 12 months and the revenue that should arrive at the current PE level. If the PE is growing at faster rates, then the share can become a multi-bagger stock. 

4. Know About The Sources Of Earnings

Besides checking the revenue, it is also essential to know about the various sources of its earnings. Analyze whether the primary sources of earnings have the potential to grow at the macro-level or not. Is there any income source that can make it easily scalable? If the income sources are easily scalable, then the share can have the potential to become a Multibagger stock. 

5. Look for The Business Model, Structural, or Any Management Changes

You should also be aware of the structural, managerial, or any other significant changes. This information can be seen in the annual report, and quarterly changes report because these changes significantly impact the shares. 

Why Should You Invest or Trade in Multibagger Stocks?

Multibagger stocks are considered as the shares that can increase your current or prospective wealth. Return on such investment is much higher than your expectations. For example, if you have invested in such shares for Rs10,000 and profit amounting to Rs1,00,000. Then, in that case, your share gave your 10x higher result, which is generally called ten-bagger stock in the stock market. 

Although to get such a benefit, you need to keep such shares a few times to analyze actual growth. By doing this, you can ensure capital gains by observing its turnover before it gets sold. Generally, funds collected from the share market are used for research and development purposes. If it works well, then the share becomes demanding and highly effective; therefore, it provides a massive return. 

Is There Any Risk Associated With Multibagger Stocks? 

If you buy multi-bagger stocks in India in bulk to get a higher rate of return, but if the market does not perform well, you could face a significant loss. Therefore, you should always look for some crucial things as we have already discussed. It will help you to get caught in an economic bubble or market value trap. You should be aware of the asset bubble of the companies trading their stocks at higher prices. If you trade above the market conditions,  it can result in a massive loss.

If you have to invest in a stock considered as a multi-bagger share and get a significant result in the short term, but it can cause a loss in the long term. Therefore you should make any investment decision based on available data and market trends. Before you invest, you should carefully examine the companies’ financial statements to prevent any short-term or long-term losses. 

Conclusion

A Multibagger stock can provide a tremendous rate of return on the cost of acquisition. Still, you should carefully examine the company’s financial statement and other essentials that we have mentioned. If you make any mistake while choosing a multi-bagger stock for you, you can face loss in the short term or long term. So, I hope you have understood Multibagger stock’s meaning and how you can select the best Multibagger stock for increasing your wealth.

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