Every stock investor’s dream is to find a stock that is ‘multi-bagger’ and benefit from its rapid growth within a matter of a few years. Let’s find out how to do so!
Multi-bagger stocks are those that see a rise in prices multiple times since you first invested in them. If you invested in a stock for ₹5 and its price has doubled, it becomes a two-bagger. If it keeps on adding up to further multiples of ₹5 like ₹25, ₹55 or ₹105 then it becomes a multibagger stock. Basically, multi-bagger stock is a penny stock that had strong fundamentals and went on to see an increase in price many times.
Now, whether you are new to stock market investing or not, picking the right multi-bagger stocks may need research and an understanding of a company’s fundamentals. If you are wondering how to choose multi-bagger stocks for 2024, read on.
Top Factors that Help Choose Multibagger Penny Stocks for 2024
All penny stocks need not necessarily turn into multi-bagger stocks. You would need to focus on these aspects for answers on how to choose multi-bagger stocks for 2024:
1. Changing Market Environment
2024 has begun with a strong and upbeat market with the Nifty 50 crossing the 22,000 mark. A positive market and inflow of capital does help in boosting the chances of a multibagger.
2. Government Policy
Government policies could benefit certain sectors so it helps to look at schemes in the year gone by. India’s Atmanirbhar Bharat scheme has meant providing an impetus to self-sufficiency. This may propel certain sectors and companies. Look at the multi-bagger stocks India may offer by assessing if the companies are in sectors that are seeing a new thrust thanks to government policies and incentives.
3. Look at the industry:
The first rule of picking multi-bagger stocks India has to offer in 2024 is to understand the broader theme for the year. Which industries are emerging strong and why? What is the growth prospect for a sector and how is it different from others? This rule applies not just to 2024 but in general as well.
Understanding why certain sectors may be poised for growth helps in identifying multi-bagger penny stocks in that specific sector. Look at what are the sectors and key stocks that drove the surge in the Nifty 50 and Sensex in December and January 2024. This will help you get an understanding of how things might look like in the rest of 2024. Looking at new developments in each sector, such as vaccine development and e-commerce adoption, for instance, may help you understand the big picture.
4. Look at the company’s offerings:
You would need to look closely at a company’s penny stock and understand what its offerings are. Does its product/service portfolio have a competitive edge? Are the prospects of such products and services gaining in-demand high? Investing in a penny stock that has multi-bagger stock potential is also about understanding demand and supply dynamics.
5. What are the debt levels of the company?
A good ratio to look at is the debt to equity ratio. It is a basic measure of the level of debt a company uses to operate its business. It is calculated by dividing the total liabilities by the equity of shareholders. The ratio should be lower than 0.5. Companies that have a great debt level may have problems with cash while paying back lenders and this affects cash flows.
You can also look at the interest coverage ratio which shows how much the company’s periodic earnings are able to offset the interest payments that the company has to make for its debt.
6. Adequate free cash flow
Having adequate cash flow that’s free means that there is an opportunity for growth and payment of debts, apart from distribution for those holding the company’s securities. A penny stock from such a company may show multi-bagger stock potential.
7. Look at the company’s margins
The company’s gross and net profit margins should be greater than the average for the industry. The gross profit margin results from the deduction of the direct cost of goods sold (COGS) from the company’s revenue. This indicates how well a company has been managing its raw material cost. The net profit margin is indicative of how much revenue the business has collected yields a profit for the company.
8. Look at the earnings growth
You can judge a company’s earnings growth by looking at its earnings per share or EPS. The EPS is arrived at by dividing the net profit of the company by the number of shares outstanding.
9. Look at the valuations
A company that is undervalued and also has good fundamentals and is a penny stock has the potential to turn into a multi-bagger stock. A good ratio here would be the Price to Earnings Ratio, which you can compare to that of other companies in that sector.
10. Management of the company and promoter holding
A potential multi-bagger company must have solid management with a vision for growth and integrity. A sign of a trusted company comes from its strong leadership. Also, look for a promoter holding. It is the percentage of shares that the promoters hold in the company; when there is a high promoter holding it reflects the confidence they place in the company’s growth. So, for 2021, shortlist companies where promoter holding is high as one of the factors to help you pick the right multi-bagger.
Top 10 Multibagger Penny Stocks for 2024
The following are some of the top multibagger penny stocks for 2024:
| Name of the stock | 5 Year CAGR (in %) | P/E Ratio | Market Cap (in ₹ crore) | Interest Coverage Ratio |
| Rajkamal Synthetics Ltd | 14.04 | 109 | 16.3 | 16.0 |
| Cyber Media (India) Ltd | 49.50 | 25.2 | 65.8 | 6.04 |
| Primo Chemicals Ltd | 38.82 | 38.4 | 1,127 | 5.29 |
| Galactico Corporate Services Ltd | – | 9.30 | 82.6 | 18.0 |
| Tirupati Forge Ltd | 41.38 | 24.3 | 167 | 8.97 |
| Brightcom Group Ltd | 70.28 | 2.83 | 4,016 | 4,780 |
| Zodiac Ventures Ltd | -17.29 | 26.0 | 66.0 | 1.73 |
| SBC Exports Ltd | – | 62.7 | 762 | 3.53 |
| Prerna Infrabuild Ltd | 23.75 | 18.2 | 124 | 164 |
| Debock Industries Ltd | 9.84 | 13.7 | 107 | 32.3 |
The above list has been chosen based on the following criteria and data as of February 5, 2024:
- Sales growth 3Years > 20% AND
- Current price <₹50 AND
- Interest Coverage Ratio >1 AND
- Piotroski score >4 AND
- Return on capital employed > 22 AND
- Return over 3years >20%
How to Invest in Multibagger Stocks?
Investing in mutlibagger stocks via Angel One is easy. Simply follow these steps:
- Log in to your Angel One account. If you don’t have a Demat account with Angel One, you can open one for free online within minutes.
- Click on the search icon and look for your desired stock that you believe is going to be a multibagger stock.
- Now, place your buy order. Simply click on the ‘Buy’ button, enter your desired quantity, and select the order type.
- To complete your transaction, click on the ‘Buy’ button.
You can thereafter track the stock from your Positions and then in the Portfolio section of the Angel One app!
In conclusion
Choosing multi-bagger stocks India may have to offer for 2024 should be based on sound fundamentals like every other year. Look at a company’s performance, growth, management, promoter holding, and debt, among others before deciding it may turn out to be a multi-bagger stock. Also, look at the bigger picture for 2024. What have economic indicators such as GDP growth or consumer confidence been like? What sectors seem poised for growth this year? The answers to these and similar questions may help you pick the right multi-bagger stocks India may offer in 2024.
