How to find the next big smallcap multibagger stock
Out of the 40 small-cap multibagger stocks I studied, 16 common factors led to returns of 20x, 30x, and even 50x:
(1) Cheap Valuations:
– Price-to-Earnings (P/E) ratio was below 20.
– Price-to-Book (P/B) ratio was under 2.
– PEG ratio was under 1.5
How to find multibagger stocks with technical analysis
(2) Small Size: – Market Capitalization was less than ₹3,000 crore.
(3) Promoter ownership: – Promoter ownership greater than 60% – Some insider buying
(4) Good Returns: – Return on Capital Employed was above 20% – Return on Equity was more than 15%.
(5) Manageable Debt: – Debt-to-Equity ratio was below 1.5 – ICR was greater than 3
(6) Cash Reserves: – Companies had plenty of cash on balance sheet.
(7) Strong Cash Flow: – Cash flow from operations was higher than their net profit.
(8) Extra Features: – Sales were greater than the company’s market cap. – Sector was growing. – Sector was out of favour due to headwinds. – Company has a competitive edge in the industry