Multibagger Stocks can be stated as equity shares of a firm that creates returns in numerous ways bigger than the cost of acquisition that it had incurred. The multi-bagger stocks were initially created by Peter Lynch. It was released through his book “One Up on Wall Street”. Multibagger shares are produced by firms that have high scopes of growth, projecting strong management as well as a production method. It offers great research as well as development traits of a firm, letting them create huge demand in the market. Anyhow, in certain situations, Multibagger stocks can be seen as the tool that depicts the economy of the nation.
What are the traits a firm must have in order to gain Multibagger Shares?
Multibagger shares are linked with various levels of investment. These profits can only be gained if the firm has certain traits like that of:
•Progressive research and development scopes:
The advanced progress of a firm is linked to a great level of sales of its service in the market. To gain this, there is a need to produce quality products by the companies and also offer a great level of contentment to their customers. Drastic level of investment must be put on research as well the development of a product. This will enable the company to enlist itself in the stock exchange as multi-bagger stocks.
By observing the functioning of a multibagger stock, the performance of the issuing company can be calculated. The top players are that businesses that have high profits and also possess very little liability. The additional benefit of having multi-bagger shares is that they possess the scopes of having high earning in each share and also increase the dividend income upon the amount that was invested. These firms will have a low debt-to-equity ratio. This states that the firm possesses a strong skill in maintaining its finances. The ratio of price to earnings (PEG) is also maintained high. This is because the returns in one unit of a share are multiplied numerous times on its primary investment.