Stellar Performance! Multibagger stock BITS zoomed 1935% in just 1 year

Penny stock BITS has emerged as a remarkable success story, delivering exceptional returns to its investors and demonstrating the potential for significant gains in the penny stock market. Despite the inherent risks, the stock's performance underscores the value it can generate for those willing to navigate this volatile segment.

Over the past year, BITS has achieved a remarkable increase of 1,935 percent from ₹0.34 in August 2023. In 2024 year-to-date, the stock has shown resilience with a gain of almost 305 percent ₹1.7 in December 2023, despite experiencing losses in three out of eight months. This extraordinary growth highlights its consistent value appreciation, solidifying its status as a highly lucrative investment opportunity within the penny stock segment.

In August, the stock rose 8 percent, continuing its upward momentum after an 85 percent jump in July. However, it did experience a 5 percent decline in June. Before that, it rallied 21 percent in May, following a 12.2 percent drop in April and a 6 percent fall in March. Earlier in the year, February saw a significant rally of 46.5 percent, after a massive 46 percent surge in January.

The stock reached its record high of ₹6.92 on August 7, soaring 2,206 percent from its 52-week low of ₹0.30 on August 28, 2023. This outstanding performance highlights BITS's ability to deliver substantial returns and maintain investor confidence amid market fluctuations.

Despite its exceptional performance, it's essential to highlight that the stock is currently under ESM: Stage II.

What is ESM?

The Enhanced Surveillance Measure (ESM) is a regulatory framework established by the National Stock Exchange (NSE) in India to improve the monitoring and oversight of listed companies, ensuring investor protection and market integrity.

In Stage I of ESM, securities are traded under a trade-for-trade mechanism with a price band of either 5 percent or 2 percent.

In Stage II, trading is allowed on all trading days through periodic call auctions, also with trade-for-trade settlement and a 2 percent price band. Previously, trading in this stage was restricted to once a week.

About the Firm

BITS Limited offers a wide range of educational services both in India and internationally. The company provides education in fields such as arts, commerce, science, computer software and hardware, business management, hotel management, engineering, and technical education. These services are offered through centers, institutes, colleges, and universities, including distance learning programs. 

Additionally, BITS Limited offers corporate management training via classroom sessions and other methods, as well as trading, importing, and exporting various software solutions. Originally known as Bits India Ltd., the company changed its name to BITS Limited in October 2000. Incorporated in 1992, BITS Limited is based in Mumbai, India, and operates as a subsidiary of Vizwise Commerce Pvt. Ltd.

Earnings

In the March quarter (Q4FY24), BITS reported a net profit of ₹3.11 lakh, massively rising from ₹1.52 lakh in the same period last year. Meanwhile, total revenue for the quarter stood at ₹24.6 lakh, rose 9.5 percent from ₹22.45 lakh a year earlier.

For the fiscal year 2023-24, the company achieved a net profit of ₹13.67 lakh surging multifold versus ₹0.96 lakh in FY23. Meanwhile, revenue for FY24 decreased to ₹102.88 lakh as compared to ₹108.59 lakh in the previous financial year.

Brokerage Views

ICICI Direct is bullish on BITS, citing its strong momentum as a key factor, with the stock price consistently remaining above short, medium, and long-term moving averages. The company has a strong annual EPS growth, further solidifying its position as an attractive investment opportunity. It also hit its 52-week high in the previous session.

Meanwhile, its weakness, as per the brokerage, is its declining net cash flow. The company has not able to generate net cash.

Investing in penny stocks can be appealing due to the potential for high returns with relatively low initial investments. However, this market segment carries substantial risks. One major issue is liquidity; penny stocks typically have lower trading volumes compared to larger companies, resulting in more pronounced price fluctuations and increased volatility. Additionally, these stocks often face less stringent financial reporting standards and regulatory oversight, which can open the door to market manipulation and fraud.

To navigate this high-risk environment effectively, investors must conduct thorough research and apply robust risk management strategies. It's essential to understand the company's fundamentals, evaluate its market position, and closely examine its financial health. Maintaining a disciplined investment approach and setting realistic expectations are also crucial for mitigating potential losses. By being diligent and cautious, investors can better manage the uncertainties of penny stocks, thereby improving their chances of capitalizing on opportunities while protecting their investments from unnecessary risks.

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