The Growth Story - #1 Multibagger Magic Mantra

First and foremost you need a company which is growing for picking a multibagger!

I know, this is a no brainer but there are thousands of people investing in companies making huge losses year after year. They are hoping for a turnaround story, but never happens! Example: Suzlon

I would suggest you to stay away from such companies.

You need stocks which are growing both in terms of revenue and in profits.

Revenue and profits may not always dance together 😜

Case 1: Many companies are growing both in terms of revenue and profits. This is the kind of companies you should look out for.

Case 2: Many companies are making losses in terms of both revenue and profits. I would suggest you stay away from such companies.

Case 3: Few companies are growing in revenue, but profits are NOT growing, due to unnecessary expenses or higher raw material costs.

Case 4: Few companies are growing in profits but revenue growth remaining stagnant. This sounds very odd and unusual, but this is actually possible because of internal cost optimizations or raw material price reduction.

Whenever you hear any stock suggestion, first step is to look at their revenue and profit growth of last two years atleast.

If there is no growth or not so rapid growth in both revenue and profits, then you should just ignore the stock.

Let's take a case study: Maruti Suzuki (link)
Both Revenues and Profits are growing at a very rapid phase!

Take a look at another stock which is trending downwards: Tata Motors (link)
Both Revenues and Profits are trending down!

FYI, Tata Motors has launched new vehicle models and gaining traction, so a year from now this maybe trending up, but right now it is a risky investment.

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