How to Analyze and Find the Multibagger Stocks from Recommendations?

Posted by Gaurav Goel on May 22nd, 2017

When investing in stocks, you might want to invest in the ones that multiply money quickly. Stock brokers will just give multi-bagger recommendations with their analysis of the top potential stocks. The investor has to take the decision to invest in those stocks. However, identifying such stocks can often be a challenging task. Every investor tends to hold multi-bagger stocks in the portfolio. When it comes to long-term wealth creation, these stocks can prove to be very useful.

Here are some factors to consider identifying multi-bagger stocks:

Check with the industry potential
When you blindly invest in any stocks of any industry without the deep understanding, high chances are there to fail. Stock experts suggest investing in an industry which you have an understanding and show high growth potential. It is important to identify the growth potential of the industry before investing on it blindfolded. Understand them and analyze the latest developments taking place in the world of business. This will help investors to recognize the growth prospects of an existing or emerging industry.

The debt levels matters
One of the main factors to consider is the debt level of the company. Find the companies that are growing at a rapid pace and have zero or very less debt. They are considered good for medium to long term investment. When you purchase the stocks of a debt-ridden company it is questionable when it comes to providing multiple returns. It is obvious to make sure the company has a debt of less than 30% of the equity before making the investment.

Earnings per share (EPS)
Earnings per share or EPS refers to the rate of profits received by the shareholders per share. It can be measured simply by a total profits divided by a number of shares outstanding as on the closing date of books. Potential stocks can be classified where companies are growing at greater than 30% of EPS every year.

Rely on the performance of the company 
Success comes with the performance. When you invest in a company stocks check whether the company is doing in terms of revenue and net profits. The quarterly net profit growth of a company shows its financial status and future growth potential. Ensure the net profits of the company have increased consistently. Moreover, look at the revenue model and earning sources of the company. 

Look for the innovative investments
Always choose the companies who keep investing in R&D to develop innovative products that give benefits in the subsequent years. Making such investments will help you add multi-bagger stocks in your portfolio.