What is a Multibagger Stock: The Best Investments for Your Money

Multibagger Stocks in India

Multibagger Stocks in India

Multibagger stocks are stocks that have great small-cap companies that have the potential of becoming multibaggers. In simple words, a multibagger stock is a type of equity share that can provide a return of 100% or more in a relatively long duration. The best multibagger stocks in India are mostly purchased at their initial public offering (IPO) prices and sometimes even at a discounted price. These stocks make a very sound investment strategy for people who wish to get their good hands on something big in the future. 

What are Multibagger Stocks?

As an investor, it is common to be looking for companies that give the best return on the initial capital invested. These stocks are called multibaggers. This term refers to stocks that give ten times or even a hundred times the return on the original investment made. A lot of investors talk about finding these companies but do not understand what makes them multibaggers. At first glance, it might seem too good to be true to find a company that can give high returns upon the sale of stocks. The definition of these stocks, therefore, needs to be clearly defined.

Multibagger stocks are high-growth companies whose shares appreciate by at least 200% within a relatively long span. Multibagger stocks are a wide category as there are other types of high-growth companies like highly profitable high-growth companies, very undervalued stocks, and stocks with unrealistically high and steady growth. 

What Characteristics Should a Company Possess to Generate Multibagger Shares?

In the world of stock markets, when a stock grows up to a value of 5 times its cost price or maybe even more, it is termed as a multibagger. A multibagger share is a share that grows several folds over its cost price. There are many stocks in the market that have been generating multibagger returns consistently. Let us examine some of the characteristics of companies that consistently generate multibagger returns.

Qualitative Characteristics of a Multibagger Stock:

Advanced research and development skills 

One of the major drivers behind a company’s growth and success is the quality of its research and development team. R&D is a major expense for a company, and the extent to which it is funded is a reflection of the extent of growth goals that have been set by management. A strong R&D team generally results in innovation, leading to new patents and eventually revenue from those patents. If you’ve found a multibagger stock, it probably has a strong R&D team, as this is one of those characteristics that contribute to the growth of a firm.

High growth 

High growth is a desirable characteristic of a share. Compound interest on capital leads to a more impressive result as the base number on which it is worked out goes up. A good business with high growth is the driver of wealth generation. If you believe that, then you should concentrate on those high-growth companies. For such companies, the stock market does not always work as an accurate barometer to gauge their future. High growth industry is an absolute must to generate multibagger returns.

Excellent Management Skills

Excellent Management Skills are the first thing that comes to my mind when I think about generating multibagger shares. Strong management can certainly make or break a share whether it is a small-cap or blue-chip stock. No point in picking up an excellent business if the management team does not have expertise in that particular industry. 

Management is the key to the success of a company. It is management that makes a company perform brilliantly or miserably. In order to keep a nation progressing, we require visionary and competent management. From top level to bottom, right from the board of directors’ meetings to the lowest rung of the ladder, we need outstanding and reliable management.

Financially Conservative Management

Management should be financially conservative. Its first priority should be the shareholders’ capital, not its expansion or growth initiatives. Management should return capital to the shareholders by means of cash dividends, share repurchases, and low-risk stock investments. A focus on financial conservatism means management is financially diligent. It also means the company is less likely to be overleveraged or face liquidity problems.

As an investor, it is always desirable to invest in a company that is financially conservative. A financially conservative management team ensures that the company maintains certain levels of financial discipline during both good and bad times, which prevents them from incurring excessive debts. This also makes it easier for the company to operate within the conditions of its capital structure. Some of the examples of financial conservatism are low debt/equity ratio, adequate contingencies for costs especially on working capital, sourcing of raw materials on arm’s length basis, etc.

Quantitative Characteristics of a Multibagger Stock:

High growth 

High growth is a desirable characteristic of a share. Compound interest on capital leads to a more impressive result as the base number on which it is worked out goes up. A good business with high growth is the driver of wealth generation. If you believe that, then you should concentrate on those high-growth companies. For such companies, the stock market does not always work as an accurate barometer to gauge their future. High growth industry is an absolute must to generate multibagger returns.

High-Profit Margins

High-Profit Margins are the biggest booster for the stock price of any business, both in the long & short run. The high net profit margins mean that more cash goes into the hands of business owners for them to invest elsewhere or to reward investors with dividends or buybacks. Multibagger shares are shares that have outperformed the market by a huge margin. To earn these kinds of returns you want to buy shares in companies with high-profit margins. Margins are basically how much profit a company makes off of every dollar of sales. The higher these margins are the more profit the company has left over after accounting for all of its expenses. 

Little or No Debt

There is a formula for successful stock market investments. To make money in the stock market, you need to buy shares of companies that make money. It doesn’t matter what the company does, whether it’s profitable or not, and whether the business is an ultra-high growth technology business or a mature business using legacy technology. 

As long as the company generates earnings and cash flow that’s not completely consumed by fixed expenses and debt service, then that company can be considered for investment even if it’s operating in a capital-intensive industry like mining. One of the most important factors to consider while investing in a company is its debt-equity ratio. A company with little or no debt will be better placed to take advantage of attractive investment opportunities, which may create “multibagger” shares over time.

Free Cash Flow

There are numerous characteristics in which a company can possess to ensure they produce profits. One of these traits in particular in importance in ensuring the company in question in generating at least a multibagger share price for investors is by looking at its amount of free cash flow (FCF). When analyzing this trait, it is quite simple to see what distinguishes between both growing and mature companies; the ones who are generating profits versus those who are either failing to generate profits or are not earning any money at all.

Multibagger stock opportunities possess a characteristic that allows them to grow their intrinsic values in a sustainable manner over a period of years. During the initial phase, when the stock value is low, this characteristic allows them to invest in areas that would later be reflected in higher future cash flows.

Why Should You Invest In Multibagger Stocks?

There are certainly strong arguments that would convince anyone to invest in a bagger. Multibagger stocks are those stocks that exhibit an exponential return on investment (ROI). If you make the right investment decision by choosing the right stock at the right time, it may take several years or even decades to see your returns, but those returns can easily be multibagger and give the best and maximum returns over a period of time.

What are the benefits of investing in Multibagger stocks?

Multibagger stocks are a highly lucrative investment strategy that allows you to become a millionaire in a relatively longer period of time. It is a well-known term in the market that multibagger stocks are the ones that give a significant return to the investor. 

Multibagger stocks are those investments that give a return of more than 100% from your investment. Multibagger stocks often help you to reach your financial goals within a longer time period. These stocks require high risk as you directly invest for higher returns. In high return stock investment, it may take more time to get you profits as compare to multibagger stocks as it offers high returns on relatively smaller investments.

Better return on equity

An investor in multibagger stocks stands to gain big profits, in the long run, owing to their high returns on equity. Despite the fact that the stock market is highly volatile and risky, investors can protect themselves by taking sufficient measures to avoid getting into any financial crisis. 

Advantage of opportunity created

There is an opportunity to multiply money in the stock market, but this opportunity comes with high risk, and it can be very difficult to find such opportunities. It makes sense that average investors like you and me tend to shy away from such risky ventures. However, if we look beyond the risk we may come across some multibagger opportunities. Multibagger stocks present us with a chance to create wealth by buying stock in companies that have not only good prospects in the future but also the ability to create value for investors.

Why do investors tend to miss out on obvious multibaggers?

If you’re an investor, you know how hard it is to find stocks that have the potential of being multibaggers. Sure, there are broad markets that have low risk and offer modest returns. However, what you really want are companies that have the ability for massive growth. By massive growth, I’m talking about 10x, 100x, or even 1,000x returns on your money. Many of the biggest companies in the world are multibaggers.

Investors buying stocks on the recommendation of some analysts thinking those stocks would do well which later turn out to be a dud or at best just move sideways. Not that it is rare but an unfortunate reality. The more the number of stocks getting listed on exchanges and investors learning about stocks and their products, the harder it has become for individual investors to find promising stocks. The more times we see investors buy a stock without doing adequate research or not having a system of analysis, they are lulled into complacency and feel good about their investment decision, only to see their investment go down.

Why do investors miss out on obvious multibaggers? Well because having a computer screen in front of you doesn’t make a lot of difference because the information from the past does not equal investment success in the future. Because of this, investors do worse over time.

Looking for calls on multibaggers

Multibagger stocks can turn a small initial investment into a much bigger sum in the future. While such stocks add value to your investment portfolio, their discovery remains a challenge for investors. Multibaggers are often misidentified due to certain common mistakes that prevent them from identifying and benefiting from them in time.

A common mistake that prevents people from identifying and benefit from multibagger stocks is that they look for tips from friends and brokers. For a company to become a multibagger it must be inherently priced at a significant discount to its intrinsic value. 

Being in a rush to book profits

You might be under the right impression that booking profits mean doing the reverse of what you did when you first bought it. Except, that’s not necessarily true. Never rush to book profits. I have seen newbie investors go gaga chasing short-term gains and book profits prematurely, only to put themselves at risk of being wiped out by a major correction or crash.

Focusing too much on low P/E stocks

If you focus on low P/E stocks, you are actually making a mistake. As you have probably heard before, the law of nature is that the stock price equals the company’s worth. That means that if a company’s current market capitalization is lower than its book value, it’s undervalued which allows for further growth. People focus more on low P/E stocks as it’s logically correct to believe that stocks with a low price-earnings ratio are more undervalued. 

Focus on index stocks rather than on mid-cap stocks

The stock market and its underlying companies comprise an intricate and complex system. Many people lay claim to the secret recipe that guarantees consistent and sizable profits over time, but it is typically just an illusion. However, there is one basic principle that tends to trump all the others — focus on index stocks rather than on mid-cap stocks. The reasons are fairly straightforward, but it doesn’t stop people from continuing to invest in mid-cap stocks.

Whether you are new to stock market investing or not, you should focus on index stocks rather than mid-cap stocks. This is because the stock market has grown steadily over time. The growth of the market has made it possible to find multibagger stocks easily, but one important thing that many people do not realize is that large-caps are less capable of producing huge returns. Multibagger stocks are also more likely to be found in small caps and mid-caps stocks.

Not having the patience for the multibagger story to play out

Quite often, especially when we are hunting for big gains, we tend to invest in stocks that show promising potential. If the tip turns out wrong and the stock crashes, we realize that it is possible to lose money in stock markets as well. It is very easy to judge a large loss as a bad judgment and we tend to cut our losses and exit our position quickly. 

Ideally, we should wait at least 3-4 years for the situation to stabilize and correct itself before coming to a conclusion. But impatience and our natural inclination towards quick gratification make us arrive at an early verdict.   Our natural instinct compels us from staying invested in a play once there is a pain as well as from waiting patiently for the gain that might materialize later

Lack of Diversification is not acceptable

Too many investors get less diversified across too many themes and this is one of the common mistakes that prevent them from identifying and benefit from multibagger stocks. They just can’t understand why they’re not making money. 

Diversification across fewer themes is not conducive to high-returns investing. These companies often derive high valuations from offering a unique good or service within their market, and when their business model is disrupted, they may see earnings drop dramatically. Therefore, when analyzing stocks in your portfolio, the most fundamental aspect to consider in regards to returning is: how does this stock react during times of macroeconomic and corporate uncertainty?

You see, many investors aren’t diversified across enough themes. They may diversify across different stages of the investment cycle, but not across themes. The reason why the best future multibagger stocks in India are rare is that you need to be able to identify one stock that can shoot up ten times or more in value, and you need to be open to investing in the large number of stocks that are likely to go nowhere fast.

How to invest in these stocks?

This is where our company falls in. Multibaggers.co.in has a very good research department with the right skills and has done a lot of research to select the right stocks. By choosing the right stocks, you can find the best multibagger stocks that also happen to have the potential of increasing in size quite rapidly. How does it work? You find the best multibagger stocks in India that you like and then keep on subscribing to get even more information about the stock. Further, there is also an opportunity to register on Multibaggers.co.in. This will help you get access to stocks across the world. Once you register, you will be given the opportunity to consult with our expert, a SEBI Registered Research Analyst, who will help you make informed decisions about stocks and to invest in the best of those stocks in our research department.


With the markets being in the center of the bull market, equities are steadily going higher. The market is showing signs of long-term recovery and the prospects of this trend remain strong for the next few years. The markets have been strong for the last several years and the next few years would be pivotal for the market. What remains to be seen are the returns on the investments that investors make in the coming years. Since most of the investments have performed well in the past, it would be safe to say that investing in the upcoming years would be a prudent decision. Many readers have the tendency of being passive in their approach to investing and it is a natural human trait. Investing in bull markets is always exciting but comes with a huge amount of risk.