7 tips to discover a multibagger stock amid weak markets
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Sensex, Nifty continue to trade sideways as a lacklustre earnings season along with record foreign outflows have dragged down domestic markets from all-time highs. Here are 7 tips to discover multibaggers as stock prices fall.
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Market experts advise investors to find a company that is trading below its intrinsic value, offers high earnings growth potential and has a good chance of a re-rating in the form of higher price-earnings multiples. This is like you walking on a travelator, so you get to the destination doubly faster.
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Market experts advise that emerging themes like data centres, renewable energy, electric vehicles or artificial intelligence could be the potential multibaggers.
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Market experts stress that investors should keep an eye on a company’s debt-to-equity ratio. Lower debt levels will make sure they will throw up more cash in future, if the business keep growing, as interest costs fall.
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The most important characteristic all market experts talk about in a multibagger is that it should generate free cash flow (FCF). FCF refers to the cash flows with the company after it has taken out whatever is required for capex to grow further.
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If the government goes on an overdrive to accelerate growth in a particular segment, you might see the complexion of stocks in that beneficiary segment change entirely.
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A good governance and transparent management will ensure that the company’s growth is sustained without any financial manipulation.
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It is usually a good idea to take a closer look at businesses that have an advantage over their rivals in an industry which offers significant growth potential.
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Moneycontrol advises users to check with certified experts before taking any investment decisions.
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