A multibagger is a stock that returns 2x, 5x, 10x or more on your original investment. The NGX has produced several in recent years. Here is how to find the next one before the crowd does. ๐ณ๐ฌ
First. What does a multibagger look like before it moves?
It is usually small. Not yet famous. Trading low volumes with very little media attention. The big institutions have not arrived yet. Retail investors have not noticed it yet. The price is quiet.
Then something changes.
Here are the signals to watch.
GROWING REVENUE CONSISTENTLY
Not one good quarter. Three to five consecutive years of revenue growth. A company that keeps finding more customers every year is building momentum that eventually reflects in the price.
EXPANDING INTO NEW MARKETS
When a small Nigerian company announces entry into a new state, sector or country, take note. Growth ambition at an early stage often precedes a major re-rating by the market.
LOW PRICE TO EARNINGS RELATIVE TO SECTOR
A stock trading at a P/E of 5 in a sector where peers trade at 15 to 20 is either cheap for a reason or overlooked. Your job is to find out which one.
RISING INSIDER OWNERSHIP OR BUYING
When directors are buying their own shares repeatedly, it is one of the most reliable early signals that something good is coming that the public does not yet know.
IMPROVING PROFIT MARGINS YEAR ON YEAR
A company whose net profit margin keeps getting better is becoming more efficient. Efficient companies compound faster.
IGNORED BY THE MEDIA
The biggest multibaggers are never the stocks being talked about on finance Twitter before they run. They moved before the crowd arrived.
The formula: growing business, cheap price, low attention, rising insider confidence.
You will not find the next multibagger by following the most talked-about stock on the timeline. You will find it by studying the ones nobody is talking about yet.
Not financial advice. Do your own research.
