Earnings growth is the foundation of a multibagger stock, which is a stock that has the potential to provide substantial returns over a short period of time.
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This growth is fueled by four key factors: sales growth, operating leverage, margin expansion, and debt reduction. Sales growth refers to an increase in the number of products or services sold, which leads to an increase in revenue.
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Operating leverage refers to the ability of a company to control costs, resulting in higher profitability. Margin expansion refers to an increase in profit margins, which occurs when a company generates more revenue than it spends.
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Finally, debt reduction refers to a decrease in a company's debt, which leads to an improvement in its financial stability and ability to generate profits.
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By combining these four factors, a company can achieve significant earnings growth and attract investors, leading to a re-rating of its stock and the potential for a multibagger return.
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