The essence of 100x
Alchemy of SQGLP (Size, Quality, Growth, Longevity, Price)
Our analysis of the 100x stocks suggests that their essence lies in the alchemy of 5 elements forming the acronym SQGLP – Size (of company), Quality (of business and management), Growth (in earnings), Longevity (of both quality & growth) and Price (favorable valuation). We discuss each of these 100x essential elements in the following sections.
SQGLP: At a glance
| Element | 100x Feature | Checklist criteria | ||
| S – Size | Company should be small and | • | Small size, ideally both in terms of sales & market cap | |
| relatively unknown | • | Low analyst coverage & institutional holding | ||
| • | Low traded volumes | |||
| Q – Quality | Quality of business | • | Large existing or potential profit pool | |
| • | Favorable competitive landscape | |||
| • Potential for above cost-of-capital returns | ||||
| Quality of management | • | Unquestionable integrity | ||
| • | Demonstrable competence | |||
| • | Growth mindset | |||
| G – Growth | Growth in earnings | • | Multiplicative interplay of growth in (1) Sales volume | |
| and/or (2) Selling Price and/or (3) Margin. | ||||
| L – Longevity | Longevity of quality & growth | • | Assess the company’s CAP (competitive advantage period) | |
| • Check whether growth is reverting to mean or not | ||||
| P – Price | Favorable valuation | • | Ideally, enough room for valuation re-rating | |
In our analysis thus far, we have made most of these elements fairly objective, except for quality of management. We table below companies which meet the following 100x criteria –
• Market cap less than INR30b
• Businesses which offer play on Value migration or Niche opportunity
• P/E not over 25x trailing 12-month earnings.
Potential 100-bagger stocks
| Company | Small & unknown | Value Migration / | Favorable valuation |
| (Mkt Cap, INR b) | Niche opportunity | (TTM P/E, x)* | |
| Aarti Drugs |
10 |
Pharma exports | 13 |
| Suven Lifescience |
22 |
Pharma exports | 17 |
| Granules India |
16 |
Pharma exports | 17 |
| DCB Bank |
29 |
Private banking | 18 |
| Tata Elxsi |
19 |
Specialized software exports | 21 |
| Shilpa Medicare |
20 |
Oncology drugs research | 24 |
| Atul Auto |
10 |
Niche 3-wheeler player | 25 |
Aarti drugs I crossed from there but could not buy for some reason. Suven has corrected and also it is not cheaper so sold most of them with Caplin point. But yes, Suven is looking very active and could hold that.
Give any Multibagger Script for future…