https://futurecaps.com/tag/multibagger/
Futurecaps is a SEBI Registered Research Analyst providing Multibagger service to Indian Stock Market.
If you are a new investor, we recommend you go through this table below. This will help you understand the Multibagger Creation Journey.
| Year | Description | Returns |
|
Starting Year |
Here you Identified a Multibagger based on Past Performance & Growth aspects.
For example, The capitalization is 300 Crore & PE is just 5. Imagine you Invested 1 Lakh Rupees on it. |
0% on 1 Lakh |
| After Year 1 | The company performed well as expected and displayed 20% EPS Growth.
Now PE is 4. But all EPS growth will not be reflected in Price, especially in the beginning years. Hence you will get +/- 20% returns. |
+/- 20% |
| After Year 2 | Now the company performed well again with another 20% EPS Growth.
This time the price will have to start reflecting as more & more analysts, people, funds will be looking into the stock. Let us say the price gained 50%. The PE is 5 again. |
+ 20% | 1.5 Lakh |
| After Year 3 | Your company is performing well with another 20% EPS growth.
This time the market visibility is high & hence the price jumped another 100% Now the PE is around 8 with Capitalization 600 Crore. |
+ 100% | 3 Lakh |
| After Year 5 | Now you are on Year 5. The compounded EPS growth of 20% lead to 100% EPS growth in 5 years.
Since the Capitalization is above 1000 Crore, Mutual Funds will start Investing. Big Money & Increased Visibility leading to Higher PE. Now the PE is 20 with Capitalization 1200 Crore. |
+100% | 5 Lakh
5X Gain in 5 Years Now onward 20% EPS growth leads to 30% price growth. Also, you will earn 100% return on original capital. i.e 1 Lakh gain every year. |
| After Year 10 | Now the company is growing again at 20% CAGR.
Now the PE is 30. |
+500% | 30 Lakh
At this point you will start getting Dividend Yield 1% as 30 Thousand rs. per year. 30X Gain in 10 Years Wealth Creation! |
| After Year 20 | If you are lucky to have a Superbagger with 20% CAGR. Eg: Infosys, Wipro, Page Industries etc.
Now the PE is 40 and you have a 100X returns on original capital. All these are possible as, Infosys gave 300X returns in 20 years! |
+3000% | 10 Crores
Now the Dividend Yield will be 1 Lakh rs. per month equal to your Original Capital investment. 100X Gain in 5 Years Cash Flow Generation! |
This is how Stock Market creates wealth & cash flow. It takes really long time for the compounding to work. No shortcuts!
So here are the problems of amateur investors:
- They add more stocks than above learning & tracking capacity
- They exit stocks every other year breaking the power of compounding positioning
SO I recommend each & every investor to understand this process & continue holding stocks long term discarding noises, as long as their fundamentals & growth factors are intact. Be like Pro!