From zero to hero: Three rising star stocks

You may have faced the question: where do you see yourself in five years? A just question, indeed. Markets or not, growth is coveted.

In this spirit, we looked for businesses that have witnessed the most holistic improvement in the past five years. In simple terms, we wanted to find out stocks that were once a risky bet but are now showing signs of a winner.

To do the above, we took the help of our newly launched Value Research Stock Ratings . We considered stocks that had a low rating of two stars or below five years ago but are now sitting atop the charts with a rating of four stars and above.

The above exercise landed us with three stocks. Here's the list.

• Godawari Power & Ispat
  
• Jindal Steel & Power
  
• Deepak Nitrite

Let's take a closer look at how they achieved this turnaround.

Five-year annualised returns: 62 per cent

How it managed to turn the tide

• It reduced its debt obligations to near zero by FY22.
  
• Higher iron ore prices boosted its operating margins from 9 per cent in FY17 to 18 per cent in FY18.
  
• A favourable macro environment improved demand.

Five-year annualised returns: 36 per cent

How it managed to turn the tide

• Improved capacity utilisation of its iron ore and coal mines.
  
• Higher iron prices helped it grow its earnings.

Five-year annualised returns: 63 per cent

How it managed to turn the tide

• Its phenolics plant commenced operations in FY18, boosting its topline growth.
  
• Lower competition from Chinese alternatives in the Indian market.
  
• It improved its debt-to-equity from 1.1 in FY19 to 0.1 in FY23.

A word of caution

The above are not investment recommendations. Note that in the above exercise, we primarily relied on our quantitative ratings. We have not explored the quantitative aspects. For example, we have not enquired if the macro tailwinds that raised iron ore prices are sustainable.

Hence, please do the due diligence before investing.

Also read: Why you should use Value Research Stock Ratings