How to Find Multibagger Stocks Using Fundamental Analysis: A Complete Guide

1. PE ratio under 30:

If you see a stock in a specific sector with a PE ratio below 30, put it on your watchlist because a low PE ratio suggests the stock is a good value.

2. Focus on non-cyclical businesses over cyclical businesses:

If you're picking individual stocks, it's important to focus on businesses with long-term potential. It's wise to stay away from sectors that are cyclical or tied to commodities.

3. Record-breaking revenue and profits:

If a company consistently reports record-breaking revenue and profits each year, it indicates strong health and performance.

4. Stock price at its 52-week high:

If a stock is trading at a 52-week high, it means there's strong momentum with more people buying than selling. Once a stock starts going up, it often continues in that direction for a long time.

5. Minimal debt:

Companies without much debt are generally safer for long-term investments. However, if a company takes on debt to grow or expand, it's not necessarily risky. If D/E ratio is under 0.5, the debt is seen as manageable. Ratios over 1.5 may indicate excessive debt.

6. Promoter ownership exceeding 50%:

If a company founders own at least 50% of the shares, It shows their confidence and shared interests with investors.

7. Recent buying by promoters:

If company promoters buy shares from the open market, it suggests good things are happening in the business, as I explained in my recent video.

8. Stable or growing operating margin:

If a company's operating profit margin (OPM) increases, it indicates improved efficiency in operations, translating to higher earnings per sale. OPMs above 10% are generally considered strong.

9. Outstanding quarterly earnings growth, both QoQ or YoY:

If a company shows growth in earnings quarter-over-quarter and year-over-year, It indicates the company is heading in the right direction. Seeing triple-digit growth is a strong positive for the company.

10. Significant operating leverage:

If a company sees a 20% rise in revenue resulting in a 40% boost in profits (without any exceptional items), that exemplifies the concept of operating leverage.

11. Order-book to executed with 1-2 years:

If a company lands a large order book that must be completed soon, and its management has a proven history of successfully handling such orders, it suggests future growth in revenue and profits.

12. ROCE greaten than 15%:

Remember to check ROCE—it should be over 15%. Strong ROCE suggests skilled management, smart capital allocation, a competitive edge, and potential for growth.

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Written By- Rohan Das