What Are Multibagger Stocks and Why Do People Invest

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When the equity shares of a business produce a return on investment of more than 100% or several times more than the acquisition cost, they are called multibagger stocks.

Are you interested in knowing more about these stocks and why they are suitable investments? Here we have gathered valuable information from some of the Top stock consultants Gujarat and sharing it with you. Continue reading.


Invented by Peter Lynch, these stocks are usually associated with companies with reasonably high growth potential, offering a huge prospect to investors to grow their portfolio returns significantly. In short, multibagger stocks are those that yield more and cost little.

There are also a few characteristic attributes of multibagger stocks that differentiate them from others. Ideally, these stocks are issued by companies that have all of the following:

  • A powerful and competent team for management
  • Have and follow virtuous fundamentals
  • A better production technique
  • A proven track record
  • Strong R&D skills
  • Practices good corporate governance and have high standards and
  • Low or comparatively undervalued or moderately valued stock prices.

These companies aren’t many, and so the number of multibagger stocks is limited. This, in simple words, means any and every stock advertised as a multibagger may not be in the true sense.

Therefore, you will need to be extremely careful while making your choice. It is better you consult with some of the Top stock consultants Gujarat to have a fair idea and even get proper guidance to choose the right ones.

Experts say a company cannot ‘produce and issue’ multibagger stocks. These are usually the fruits of the effort they put in the past years that change the value, characteristics, and potential of their shares and become multibagger stocks. This can take a long time, say about ten years.

However, there are some significant factors and practices that can help expedite the transition of general equity shares into multibagger stocks, such as:

  • Having low debt-to-equity ratio
  • Having a better P/E or price-to-earnings ratio
  • Having a steady revenue stream
  • Offering low-cost shares
  • Having a distinct edge over its competitors and
  • Better performance

In layman’s words, this means that all stocks with a large cap may not be multibagger. It must belong to a company that is growing dramatically.

Also Read: Discover the Power of Bifocal Safety Glasses

Reasons to Invest

So, now that you know what multibagger stocks are and which companies you should look for while selecting and investing in them, look at their prospects and the most significant reasons why you should invest in them.

  • High returns:

One of the most significant reasons to invest in multibagger stocks is to grow your wealth substantially since the returns on investment in these stocks are enormous.

However, there are risks involved, so you should have a reasonably high-risk tolerance. Also, you should be patient to wait for a considerable amount of time because returns on these stocks are not realized overnight.

Therefore, if you are looking for dividends or a regular income from your investment, investing in multibagger stocks is not feasible. Consult with some of the Top stock consultants Gujarat for further assistance and advice.

  • Take advantage of undervalue:

The cost of the acquisition of multibagger stocks is low. This is because they are typically undervalued. Investing in them will enable you to take full advantage of this aspect.

In an emerging market, several types of shares are undervalued. This is because the investors are not able to realize the exact potential of these stocks for sure.

This results in the discounted price of multibagger stocks. If you have the money to buy a considerable chunk of these stocks, you can take full advantage of the low-cost price and its potential to produce much higher returns.

  • Earn more:

Apart from gaining a higher investment return, you can earn more by selling these stocks when their prices rise.
Moreover, investing in companies with greater potential to face challenges and endure failures will increase your chances to earn more profits down the lane manifolds.


Multibagger stocks are highly productive, and there are quite a few reasons to invest in them apart from them. Just assess, analyze, take help from the experts, and limit your investment percentage.

Also Read: What Are 5 Signs of a Multibagger Stock

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