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Multibagger Stocks Below Rs 100 Stocks

Multibagger stocks are on every investor’s radar. After all, who wouldn’t want to kind the next big multibagger?

The fascination with penny stocks - stocks trading below Rs 100 - has made the hunt for multibagger penny stocks a potentially rewarding activity.

In fact, a number of well-known stocks that currently trade at high prices today, i.e. bluechip and largecap stocks, started out as mere penny stocks.

You can pick penny stocks with 10x potential with these criteria.

Capable Management

A skilled management team with high levels of integrity can sustain the success of the business in the long term.

look at aspects like corporate governance practices, board independence, pledging of shares, discipline with obligations as well as diversion of funds to other businesses or personal interest.

Competitive Advantage

Check if it’s doing anything innovative that sets them apart from its competition in the market.

This advantage will also drive sustainable high profit growth in the long run which is a trademark of a penny stock that can become a multibagger.

Promoter Holding

Ideally, you should invest in a company where the promoters are equally invested. If you see that the promoter holding has increased over time, that’s a positive sign.

It signifies the people who started the business remain committed to its growth and its future.

History of Earnings

The strongest indicator for a potential multibagger stock is the company's earnings growth. Check how well the company has done in the past on this front. It will give you clues about the future.

Capital Allocation

This is perhaps the most important criteria.

How is the company making decisions about using its funds. Is it paying down debt? Does it pay dividends? Is it investing in the business to make more profits in the future?

If the company is using the funds inefficiently, you should give it a pass.

Growth Opportunities

See if the company offers a comprehensive range of products or services that can meet the demands of the market over the next 5 to 10 years.

A clear expansion strategy and the vision and focus of the management also play a big role here.

All these criteria taken together will help you find multibagger stocks under Rs 100.

Check out Equitymaster’s stock screener for multibagger penny stocks.

You can also checkout our playlist on Multibagger Stocks on Equitymaster's YouTube channel.

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FAQs

Which are the top multibagger stocks in India right now?

As per Equitymaster's Stock Screener, these are the stocks which have given multibagger returns to shareholders -

These companies have been ranked as per the returns they have delivered to shareholders in the last three years on a compounded annual growth rate (CAGR) basis.

Remember, it's not easy to identify future multibagger stocks, but if you do it carefully and with due diligence, you can find high growth companies which can turn out to become future multibaggers.

How to pick the best multibagger stocks in India?

While there's no guaranteed method, multibagger stocks have some qualitative rules.

#1 A solid competitive advantage

A company's ability to sustain its market share over time is what matters. A competitive advantage can be anything ranging from brand name and goodwill to patents, etc.

For example, IRCTC currently enjoys a 100% monopoly in its industry. It is an e-ticketing and catering company that has no competitors yet.

#2 Fast sales growth and a high current or future profitability

Consistent growth is certainly an indication the company is doing well and has good prospects. You should understand the business, its future prospects, expansion plans, and industry outlook.

#3 Low or falling debt levels

Multibagger stocks usually have low debt. If a company is highly leveraged and unable to generate profits, it can be a cause of concern for the investor.

#4 Growing free cash flow

Investors love companies that produce plenty of free cash flows. It signals a company's ability to repay debt, pay dividends, buy back stock, and facilitate the growth of business - all important undertakings from an investor's point of view.

#5 High and possibly increasing Return on Equity (ROE)

Equitymaster has a screener which can help you find high growth companies. You can start you search there.

And if you want to get a sense of how big returns could be, see our list of multibagger stocks here...

When should you sell a multibagger stock?

There isn't any standard thumb rule for when to sell a stock. However, you can follow a few guidelines.

You can sell the stock if the company's fundamentals take a turn for the worse. You could also sell if the stock has achieved the predetermined target price.

Other reasons for selling could be if the business has entered a mature or a declining phase in the growth cycle, and for rebalancing your portfolio.

Which stocks can become multibaggers in the long run?

Fundamentally strong stocks that have a long runway for growth and are trading at reasonable valuations have the potential to become multibaggers in the long run.

Apart from the above, another way to look for future multibaggers is to look into the past. Stocks which have delivered the highest returns in the past might be a good place to begin your search.