Hi, it is rightly said that if you invest in the stock market for a long term then your investment will give you great returns.
Warren Buffett, an investment guru also says that if you don't want to hold a stock for 10 years, don't even think of holding it for 10 minutes.
Long-term investing will save you from the volatility of the market, and also give you the benefits of compounding.
Have you heard of Albert Einstein?
He was a very great physicist, and he said that compound interest is the 8th wonder of the world.
Those who go to society will use money, and those who do not understand will suffer.
CAGR is a metric based on compounding.
How? We will know this in the next part of the video.
So, in today's video, we will tell you about 5 such companies whose return CAGR i.e. annual growth rate is above 50% in the last 10 years.
In this video, we will cover all about the business of stocks and also their key strengths and potential risks or weaknesses.
A holistic view of companies to help you in miles.
In addition, in the end, we will look at some key financial and technical metrics for all companies in one table.
We have selected the stocks taking care that these companies are fundamentally strong.
So in this list, we will tell you about the stocks whose:
Market cap is more than 5000 crores
Return on Equity is more than 15%
Debt to equity ratio is less than 1
Last year's net profit margin is more than 15%
5-year compound annual sales growth has exceeded 15%.
Before going into these 5 companies, let us know what is CAGR and why it is so important while doing stock research.
The full form of CAGR is the Compound Annual Growth Rate (CAGR).
CAGR shows the annual growth in your investment over a specific time.
In other words, it tells you how much you earn every year (compound return) on your investment.
This is a great way to find out how much your investment value has risen or fallen over a specific time.
Let us calculate the CAGR
CAGR = (Closing Balance of Investment / Opening Balance of Investment) 1/n-1, where n is the time.
Let us understand this by taking an example.
Suppose, you have invested Rs 1000 in stock for 5 years, after 5 years its value is 2000.
If you look in absolute terms, you will feel that my investment has doubled.
But this is misleading because it doesn't tell you how much your investment has grown every year.
Here CAGR is useful.
Let's calculate.
CAGR = (2000/1000)^⅕ - 1 = 14.87%.
This means that your investment has given you returns of around 15% every year.
Keep in mind that this does not mean that the share price of the company has increased by 15% every year.
Maybe the stock price is stable for the first 4 years and then suddenly it doubled last year.
On average, we can say that your investment is compounded every year at the rate of 15%.
We can also derive CAGR from Groww's calculator.
Here the initial investment is Rs 1000, after 5 years the investment value is 2000 and the duration is 5 years.
Now you can see that the CAGR has come up here also at 14.87%.
Now that we have got a basic understanding of CAGR, without wasting any time let's move on to today's 5 companies.
To calculate the CAGR of 10 years returns of companies, consider the market closing prices on April 27.
We will tell you at the end about the company which has the highest CAGR of 10 years.
The first company is Caplin Point Laboratories.
Caplin Point Laboratories Ltd is a pharmaceutical co. that manufactures different ointments, creams, and other pharmaceutical products.
It has also entered the biotech market
It is now manufacturing various biotech products like antacids anti-bacterial, antibiotics, anti-cold, anti-diabetic, etc.
In the last 10 years, the share price of the company has gone from Rs.6 to Rs.700.
As of 27 April 2022, the 10-year CAGR of the company is around 61%.
The biggest strength of the company is innovation.
The company has made many successful consumer-driven innovations.
The injectable plant has received permission from the Brazilian health regulatory agency for some time, which can help it to grow.
One of the company's major weaknesses is competition.
Due to the strong competition in the Biotechnology and Drug industry, there is always pressure on their profit margins.
The second company is Borosil Renewables.
Borosil Renewables, a part of the Borosil Group, is popularly known for its brand "Borosil".
It manufactures Renewables, Extra Clear Patterned Glass, and Low Iron Solar Glass applied to photovoltaic panels, flat plate collectors, and greenhouses.
The share price of the company has gone up from Rs 6 to Rs 700 in the last 10 years.
As of 27 April 2022, Borosil Renewables has a 10-year return CAGR of approximately 63%.
The biggest strength of the company is that it is the only company in India that produces solar panel glass.
Solar installations account for a lot of the new power capacity being added in India right now.
So this is a good thing for the company.
But the biggest threat to the company imports.
Borosil Renewables meets one-third of India's solar panel glasses demand and two-thirds from China and Malaysia.
For some time there was no import duty on the product, now the import duty is not very high.
If there is a change in import duty and it works, then domestic companies like Borosil Renewables may have to look.
The third company is Deepak Nitrite.
Deepak Nitrite is a chemical manufacturing company based in Gujarat.
The company is a leading manufacturer of organic, inorganic, fine, and specialty chemicals.
They make a wide variety of chemicals that are used in industrial explosives, paints, cosmetics, optical brighteners, etc.
The share price of the company has gone from Rs. 15 to Rs. 2300 in the last 10 years.
As of 27 April 2022, the 10-year CAGR of Deepak Nitrite is around 65%.
The company has a 70% market share of sodium nitrite, sodium nitrate, and nitrotoluenes in India.
Phenol and acetone are used in many domestic and industrial products in India, and domestic production is not yet meeting the requirement.
The Make in India initiative has a huge potential for the company to defame its market share.
In addition, the government has imposed anti-dumping duties in some countries.
This tariff is imposed by the government on foreign imports when it thinks the product value is less than the fair value.
A major weakness is the price of their raw materials is based on crude oil, the volatility of the crude oil price may impact their trading.
The second big challenge is price pressure.
Because foreign companies are able to produce chemicals at competitive prices
This enables them to offer their products at competitive prices in India.
The fourth company is Alkyl Amine Chemicals.
Alkyl Amines Chemicals Limited (AACL) is a Public Limited Company incorporated in 1979.
The company manufactures and markets various aliphatic amines, amine derivatives, and other specialty chemicals.
Aliphatic amines are products that are made from ammonia (NH3).
And they are used in the chemical, pharmaceutical, rubber, plastic, dye-stuff, textile, cosmetics, and metal industries.
The company is a global supplier of products.
The share price of the company has gone up from Rs 19 to Rs 3000 in the last 10 years.
As of 27 April 2022, the company has a 10-year CAGR of around 66%.
The biggest strength is its brand creation in the chemical manufacturing industry and it can charge premiums that its competitors cannot.
And, not only that, the company's margins are much better than its competitors.
A major risk is that the Internet and artificial intelligence have changed the business model of the industry.
And if the company is to grow it will have to build new robust supply chain networks, which can be a bit costly.
The fifth company is Tanla Platforms.
Tanla Platform was established in 2000 in Hyderabad. Earlier it was known as Tanla Solutions Limited.
It is a Cloud Communications Provider (CPAs players) that helps businesses communicate with their customers and recipients.
In simple words, it provides companies with a communication platform such as chat, voice calls, video calls, etc., on a cloud.
It has an A2P (Application to Person) messaging platform that helps businesses communicate with their customers.
In the last 10 years, the share price of Tanla has gone up from Rs 6 to Rs 1500.
As of 27 April 2022, Tanla Platforms has a 10-year CAGR of around 72%.
There are around 800 billion interactions annually through the Tanla platform in India.
Not only this, 70% of India's A2P SMS are done through our platform Trueblok.
This happened because Tanla Platform is the first company to comply with TRAI norms.
Also, the company has tie-ups with 6 telecom operators, due to which their earnings are looking good.
And, last year all the OTP messages for vaccine registration have come from their platform.
It has also partnered with Microsoft and launched a new blockchain-enabled communication platform-as-a-service named 'Wizzly'.
The platform will provide a secure and reliable communication experience to the customers.
Also, using technology, this platform will help the enterprises to improve the quality of service and reduce the cost.
The company whose market share can be good and the profitability can also improve.
A major risk for the company is that its market share is heavily dependent on pricing.
And if new companies come up with competitive pricing, their margins may get squeezed.
For these shares, let's look at the key financial and technical ratios now.
As you can see on your screen, we have shown some key financial and technical ratios of all companies.
We have included a valuation ratio in the form of price-to-earnings ie P/E ratio.
We have got a solvency ratio in the form of debt to equity ratio and included a profitability ratio in the form of return on equity.
We have included 5-year of sales growth of all these companies so that you get an idea of how fast the business is growing.
Also, we have shown 5-year returns of all the companies so that our viewers can see the long-term stock performance of these companies.
Finally, we have included the prices of 2 technical indicators so that you can see the stocks from a technical perspective as well.
We have used 2 indicators- 200 Day Moving Average i.e. 200 DMA and RSI (14).
If a company's stock price is trading above the 200 DMA, the stock can be considered bullish.
And if the price is trading like a niche as compared to the 200 DMA then the stock can be said to be bearish.
As for the RSI, an RSI value above 30 is generally considered oversold, and a trend reversal is likely to lead to an uptrend.
Similarly, an RSI value above 70 is considered overbought, and a trend reversal is likely.
So these are the 5 companies whose CAGR is more than 50% in the last 10 years.
We remind you that these videos are for educational purposes only, and do not recommend any kind of buy/sell.
We will also tell you that Groww has a channel on Telegram where you can know about the latest market updates, interesting blogs, and news.
We have given the Telegram channel link in the description of the video, so you must also join.
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