It is not easy to identify stocks giving multiple times returns. But if some special things are taken care of before investing, then the scope of identifying high return stocks will increase.
Find Multibaggers: You will often hear that investors have got double, 3 times or manifold returns in a stock. Or you must also hear that a stock has made investors millionaires. In fact, if the right stock is identified in the market, then you can get multiple times return on your investment in a short period of time. Shares giving multiple times returns are known as multibaggers. However, it is not easy to identify which will prove to be multibaggers. But if some special things are taken care of before investing, then the scope of identifying high return stocks will increase. Different brokerage houses like Sharekhan or Angel One have given some specific tips about this on their websites.
Will the company grow or not?
If there is good growth in a company, then the performance of its stock also remains good. Stocks of high growth companies have scope for better returns. Therefore, it is important to identify such a company, which has more chances of growth. Such a company looks better than other companies in its sector. It should be seen which company is doing more innovation in the same sector. Whose product portfolio is stronger? Which company is constantly working with innovation?
Identify the right sector
Along with the economic cycle, many trends also change. Therefore, in the current scenario, which sector will see more growth, it should be assessed. After that a strong company related to that sector should be identified. Therefore, a good way to choose the best stocks is to keep an eye on the economy. Stay away from the out of trend industry.
How much is the debt on the company
Before investing, it must be seen that where the money is going to be invested, how much is the debt on that company. Is that company reducing its debt or not? If there is a lot of debt on the company, then its working may be affected in future. At the same time, the sentiments are better about debt-free companies and such companies can spend a large part of their profits on increasing the business. If the company is generating free cash flow, it means that there are better opportunities for further growth. Whereas the company can easily eliminate its debt.
P/E Ratio, Valuation
The valuation of the stock can be estimated from the P/E. If the P/E ratio is high, then investors assume that the valuation of the stock is high. On the other hand, if the valuation of the share is attractive, then you can get the share at a good price. If the company’s financial position is strong but valuations are cheap, then there is more scope for increasing returns going forward.
getting dividend or not
Before investing, see whether that company is bringing profits or not. In order for any company to become a multibagger, it is important that the company’s profits remain over time. Profitable companies use a part of the earnings to distribute dividends. Dividend means that the company is profitable and investors are getting its benefit.
market-to-book ratio
Market to book ratio is a financial valuation metric used to evaluate the current market value of a company relative to its book value. It is used to compare the market capitalization of a company with its book value.
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