Multibagger! Penny stock IFCI rises over 850% in 4 years, 278% in just 1 year; should you buy?

Penny stock IFCI has posted multibagger returns in the last 4 years, rising from ₹4 in March 2020 to around ₹39 currently. This implies a return of 875 percent for its investors.

An investment of ₹10,000 in this stock in March 2020 would have turned into ₹97,500 now.

IFCI Limited provides non-banking financial services to the public sector in India. The company offers project finance for the power sector, such as renewable energy, telecommunications, roads, oil and gas, ports, airports, etc. It also provides corporate finance, offers syndication and advisory services, provides sales and resolution services for non-performing assets, and offers stock broking, commodities broking, currency trading, portfolio management and depository participant services. 

The company was formerly known as Industrial Finance Corporation of India and changed its name to IFCI Limited in October 1999. IFCI Limited was founded in 1948 and is headquartered in New Delhi, India.

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The stock has surged over 278 percent in the last 1 year and gained 34 percent in 2024 YTD.

Currently trading at ₹39, the stock is almost 46 percent away from its 52-week high of ₹71.70, hit on February 8, 2024. Meanwhile, it has rallied over 332 percent from its 52-week low of ₹9.03, hit on March 28, 2023.

The stock has lost 12.6 percent in March so far after a 19.26 percent jump in February. Meanwhile, it also fell 5.3 percent in January this year.

The remarkable upward trend underscores the robust market interest and optimistic sentiment surrounding the stock, marking a record-breaking performance for the company within the current market conditions.

Read here: Up 3887%! This penny stock turned ₹10k into ₹4 lakh in just 4 years

Earnings

In the December quarter (Q3FY24), the company posted a net loss of ₹10 crore as against a profit of ₹83.7 crore in the September quarter. Meanwhile, its revenue in the December quarter came in at ₹214.7 crore, up 29.5 percent from ₹165.8 crore in the previous quarter this financial year.

Brokerage view

According to ICICI Direct, the company has a rising net cash flow and cash from operating activity. It is also effectively using its capital to generate profit - RoCE has improved in the last 2 years and at the same time reducing debt, noted the brokerage.

Meanwhile, its weaknesses, as per the brokerage are -

- High interest payments compared to earnings

- Low Piotroski Score: Companies with weak financials

- Major fall in Trailing 12-month (TTM) net profit

Penny stocks, characterised by their low price and speculative nature, typically represent shares of small companies traded at a low volume. In India, these stocks are often priced under ₹10 and are known for their high volatility.

However, it's crucial to understand that penny stocks come with inherent risks and may not be suitable for most investors. Among these risks are susceptibility to pump-and-dump schemes, liquidity challenges, and the potential for stock manipulation.

Read here: LIC, BoB to Canara Bank: This penny stock is owned by 5 PSU stocks

Despite these risks, penny shares have gained some popularity among investors in India due to their affordable prices. Some investors view purchasing penny shares as an opportunity to invest in small companies with significant growth potential over the long term.

Nonetheless, investing in penny shares carries substantial risks. Therefore, investors should conduct thorough research and/or seek guidance from a financial advisor before considering any investment in penny stocks.

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