Multibagger: This small-cap stock jumped 183% just in January 2024; should you buy?

Cropster Agro's share price has posted multibagger returns just this year so far. The small-cap stock has more than doubled its investor wealth in January, and rallied over 212 percent in 2024 YTD. 

February is the third straight month of gain with the stock surging over 183 percent in January. It rose 25 percent in December 2023.

In today's session, the stock hit its 5 percent upper circuit limit, reaching an all-time high of ₹671.10. It has soared 415 percent from its 52-week low of ₹130.35, hit on September 13, 2023.

This notable uptrend reflects the strong market interest and positive sentiment for the stock, signaling a record-breaking performance for the company in the current market conditions.

Read here: Beating the blues! These 5 stocks jump over 50% in January 2024

An investment of ₹1 lakh in this stock in December last year would have turned into ₹3.12 lakh now.

In the last 1 year, the stock has rallied over 299 percent.

Looking at the long-term performance, the shares produced significant returns, as in the last three years, they have zoomed 2404 percent from ₹26.80 in January 2021.

Brokerage view

According to ICICI Direct, the stock has witnessed strong momentum with its price above short, medium, and long-term moving averages. It is efficient in managing assets to generate profits - ROA has improved in the last 2 years, added ICICI.

Read here: Multibagger Stock: Up over 1000%, this stock turned ₹10,000 into ₹1.19 lakh in a year

The company has posted growth in net profit with increasing profit margin (QoQ) with increasing revenue every quarter for the past 3 quarters and increasing profits every quarter for the past 2 quarters, informed ICICI.

Meanwhile, its weaknesses, as per the brokerage are -

1) Inefficient use of capital to generate profits - RoCE has declined in the last 2 years

2) Poor cash generated from core business - Declining cash flow from operations for the last 2 years

3) Low Piotroski Score: Companies with weak financials

4) Annual net profit declining for last 2 years

5) Book value per share deteriorating for the last 2 years

Read here: ICICI Lombard: 5 key reasons why Jefferies sees nearly 20% rise in the stock

Earnings

In the December quarter results (Q3FY24), the company posted a profit of ₹4.64 crore as against a loss of ₹1 lakh in the same quarter last year. Meanwhile, its profit in the September quarter came in at ₹78 lakh.

The company is engaged in the trading of chemicals, plastic, and rubber items. It was formerly known as Planter's Polysacks Limited and changed its name to Cropster Agro Limited in July 2023. The company was incorporated in 1985 and is based in Ahmadabad, India.

While the stock's noteworthy returns may catch the eye, it is crucial to highlight the inherent risks associated with small-cap stocks. These stocks, often characterised by their smaller market capitalisation, come with a reputation for high volatility and speculative nature. Given their unpredictable and sometimes erratic behavior, such stocks are considered unsuitable for investors who favor a more risk-averse investment approach. It is prudent for investors to exercise caution and conduct thorough research before considering any investment in this category.

Read here: Multibagger: Up 1845%, this stock turned ₹10,000 into ₹1.94 lakh in a year

Even for risk-tolerant investors, it is advisable to exercise caution and allocate only a small portion of their overall investment portfolio to these high-risk assets. Diversification remains a key principle in managing risk, and relying on a single, volatile asset class can expose an investor to undue uncertainties.

Given the complexities associated with such stocks, seeking professional guidance from a qualified financial advisor is paramount.

Disclaimer: This story is for educational purposes only. Please speak to an investment advisor before making any investment decisions.