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What are multibagger stocks, how to identify these stocks that rain money on investors?

Highlights

The stock giving 2 times return is called two-bagger and the stock giving 10 times return is called ten-bagger.
To identify a multibagger stock, you have to keep an eye on the fundamentals of the company.
Examples of multibagger stocks are Asian Paints, PC Jewellers, MRF, Deepak Nitrite etc.

New Delhi. Almost every investor who invests money in the stock market wants that he gets many times more returns from his investment. For this, he is looking for such stocks which have the potential to become a multibagger. But what are multibagger stocks? These are such stocks which have given returns to their investors many times more than their original value. For example, Deepak Nitrite and PC Jewelers etc. If a stock gives more than twice its value, then it is called a two-bagger stock. Similarly, those giving 10 times higher returns are called ten-bagger stocks.

But often people come to know about these stocks only when they have gone very high. There, buying these shares is not without risk. Not every stock only goes up forever, so one should avoid buying stocks giving multibagger returns at their highs. Now the question arises that how to identify these stocks in the very beginning? In this article, we will tell you how you can identify multibagger stocks and multiply your investments by leaps and bounds.

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Keep an eye on the fundamentals of the company
Corporate governance of companies giving multibagger returns is strong. Also, their business is such in which you can see rapid growth in the near future. There are other ways to identify such shares. A company whose debt does not exceed 30 per cent of its equity value, has high potential for growth in revenue and PE growth exceeds the growth in stock price, such stocks have the potential to become a multibagger. Apart from this, you should also keep an eye on the capital expenditure model of the company.

What is Equity Value and PE Growth?
Equity value is also called the market cap of the company in common parlance. The very easy way to calculate this is to multiply the number of shares of the company that are trading in the market by the value of one share. In PE Growth, PE stands for Price to Earning Ratio. This shows how much the price of one share of the company is in comparison to the earnings on that share. It is also used to calculate the valuation of the company. Higher PE may mean that the stock is overvalued or investors are expecting that the stock is going to rise sharply. Such companies which do not have any income or are incurring losses continuously, they do not have PE ratio. The way to calculate PE growth is to divide the PE ratio by the growth in earnings of a stock over a specific period of time.

Some Examples of Multibagger Stocks
Eicher Motors, MRF Ltd., Asian Paints, Pidilite Industries and Bajaj Finance are some examples of multibagger stocks. These stocks have made their investors rich by giving manifold returns. If you also keep the above mentioned things in mind, then it is possible that you may also get multibagger stock in your hands.

Tags: business news, Earn money, Multibagger stock, Share market, stock market

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