How Does Fundamental Research Help To Find Multibagger Stocks?

11 Feb 2019by Research and Ranking

How Does Fundamental Research Help To Find Multibagger Stocks?

Do you know what’s common among Eicher Motors, Finolex Cables and Phillips Carbon?

All these are Multibagger stocks that have given manifold returns due to the inherent strength of the business model and strong fundamentals of the company.

Source: # Prices adjusted for bonus and stock splits but not for dividends.

Multibagger stocks have the potential to appreciate multiple times over a long period of time. Multibagger stocks are often difficult to discover but can be discovered thorough fundamental analysis that helps you in creating a winning portfolio.

As Warren Buffett rightly says, “Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.”

Here are a few indicators that can help you find the best Multibagger stock recommendation:

1. Debt ratio:

Companies with zero debt or low debt make great Multibagger stocks over a long term as they are safer to invest due to the low leverage they enjoy.

2. Consistent cash flows with high growth potential:

Companies with stable cash flows, sound business model and high growth potential often feature in the top while scouting for a Multibagger stock recommendation.

3. Shareholding pattern:

The stake of the promoters in the company is one of the key elements to look for while identifying Multibagger stocks in India. A higher promoter shareholding shows the seriousness of the management to take the company forward. With the shareholding pattern, one needs to look at the pedigree of the management, their experience, vision and commitment to scale up the business operations.

4. Earnings per share (EPS) and price multiple:

To spot a Multibagger stock, you need to keep a sharp eye on the Earnings Per Share (EPS) and price multiple of the company. A comparative analysis of the P/E multiple with the industry average and peers in the market will tell you whether the stock is undervalued or overvalued. A Multibagger stock is usually a stock that is undervalued, have a sound business model, and enjoys a significant margin-of-safety and run by management who have skin in the game.

5. Health of the financial statements:

It is important that the company displays sound financial statements and healthy track record for at least 3 previous years. As an investor, it is recommended to check out whether the company is consistently growing when it comes to bottom-line and top-line number.

Along with these, other qualitative parameters such as corporate governance policies, risk management processes, USP of the business needs to be looked out for.

These above mentioned parameters can help you to identify Multibagger stock recommendation in India. Finding a Multibagger stock can be very time-consuming and requires lots of efforts. But if you are ready to put in a little hard work to find Multibagger stocks in India using the above-mentioned tips, your wealth creation journey can be definitely very rewarding.

If you don’t have the time and expertise to discover the future Multibagger stock, you can hire the services of the equity research firm that help you in identifying Multibagger stock by conducting exhaustive due diligence and research for you.

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