100-baggers in 10 years, with low risk

[Verneri_Pulkkinen]

A stock portfolio can be grown faster than the general market by a) constantly churning stocks that have risen sharply and exhausted their return potential, or b) sitting long-term on carefully discovered multi-baggers.

The first style is challenging due to timing.

This thread is dedicated to hunting for the latter. This is also challenging, as finding such cases is like looking for a needle in a haystack. And even that isn’t a great analogy: misses eat into portfolio returns. This is like looking for a needle in a haystack filled with finger-slicing blades.

We have at least one similar thread on the forum, Nordic ten-baggers, but the premise and goals here differ slightly.

Who wouldn’t want to find the next NVIDIA or Microsoft in its early stages? The challenge is that the company should be relatively small (mcap at most $30 billion: if such a company 100-folds, it would be worth as much as today’s Microsoft). When trying to find a “long shot,” it’s easy to take on too much risk. Furthermore, staying on board with such super-winners is difficult. A super-winner of recent decades, the energy drink company Monster, has dropped by over 70% on a few occasions. For Tesla, corrections of over 50% downwards are commonplace.

Losing money is expensive, which is why risks must be moderate.

Along with inflation and general economic growth, the stock market has doubled on average every 7–10 years.

With a 10% annual return, the market 100-folds in about 49 years. That is why there is a provocatively short timeframe in the title, 10 years. Of course, in practice, it can stretch a bit longer than that.

Rules:

The business must be understandable and possess great growth potential either by disrupting an existing market or creating a new one. If the business is not understandable, it is difficult to assess its true potential and risks.

Company management must be honest and excellent at their jobs (actions match words, good capital allocation), and the principal owners should also be competent.

The company should be profitable or credibly becoming so soon.

The stock must be cheap: P/E (or cash flow multiples) 20x max, preferably closer to ten (see the 11-baggers study in Vartissa).

Continuing with the company examples from the beginning: Microsoft went public in 1986 at a price of $35.50 per share, and with the expanded share count, the fiscal year 1987 (ending in June) EPS was 1.30. Thus, the P/E was 27x.

At the time of opening this thread, NVIDIA, which has reached an eye-watering valuation (market cap $1.5 trillion, revenue $45 billion), could be bought in the early 2010s for under P/E 20x.

Indeed, multi-bagging usually requires buying cheap.

Of course, we are not slaves to the P/E multiple. For example, years ago, Amazon was a budding tech juggernaut generating good cash flow, while its accounting profit was what it was. And of course, we realize where multiples stem from: growth, its profitability (ROIC/RONIC), and the required rate of return (let’s sophisticatedly pull that one out of a hat).

Region: the whole world, but large markets like the United States, Europe (incl. Finland), and India are likely the most potential. I would avoid hard-to-reach or politically risky areas, such as China or many other emerging markets.

There are no industry restrictions. A 100-bagger I missed in the 2010s (which I managed to sell in a panic at a loss), XPEL, makes protective coatings for car paint. But generally speaking, such companies are preferably capital-light and somewhat scalable. Note, however, that for example Tesla is not a capital-light business, and it operates in an industry traditionally considered… challenging for shareholder value creation.

So, let’s keep an open mind!

Observations, ideas, original research, reflections, and counter-arguments can be posted in this thread. If and when companies are found and discussion about them is active, they can be spun off into their own company threads.

As the creator of the thread, I hope that every comment is analytical and deliberate. There has been a desire for more substantive content on the forum, and since I’m starting the thread myself, I dare to demand even more from the content.

The challenge has now been issued.

Happy hunting for 100-baggers, train your “sitting muscles,” and make good stock picks!

[Iikka]

Excellent opening!

It would be interesting to hear, with good justifications, if there are currently companies on the Helsinki Stock Exchange that theoretically have the potential to 100-fold. 10 years is also a mercilessly long time, as companies evolve and many current “Hesuli” (Helsinki Stock Exchange) companies will likely look completely different in 10 years. A 100-fold return over a long period brings a bit of a lottery element, and every case included in the discussion involves many “if” and “but” words. For rapid earnings growth to be possible, the business model should ideally be capital-light, which means that the company wouldn’t need to invest large sums in, for example, factories or maintenance investments to grow the business or maintain current production. A scalable business model would allow investments in, among other things, increasing sales or acquisitions. The market must also be large enough and preferably global so that this future 100-bagger would have a realistic chance of capturing the market. Finland’s domestic market is likely too small for current companies to have realistic chances of producing a 100x return. Domestic market companies have, however, been very good investment targets, even if they didn’t have significant business abroad (Case: Admicom and Talenom a few years ago).

Looking in the rearview mirror, the closest to this achievement is Qt, whose stock sailed around €4.2 in the spring of 2016, and from current levels, the stock would “only” need to rise 6.2x over 2.5 years for Qt to make this list. After a 100-fold increase, Qt’s market cap would be €10.7 billion, which is a large sum by Finnish standards but still quite small globally. With Inderes’ current forecasts, the P/E ratio for 2026 would be 120x, and it’s probably safe to say that with current forecasts, this isn’t possible; instead, growth would need to accelerate to reach this staggering achievement.

Are there other horses on the Helsinki Stock Exchange that could reach this? In the software sector, this is certainly “easiest” as the business model doesn’t tie up fixed capital. The current software companies in Helsinki are so tired in terms of growth that, with current knowledge, I don’t dare put any name on the prospect list from this category besides Qt, except perhaps Aiforia, whose market cap was €80M a year ago. Aiforia is a startup but is perhaps in one of the best competitive positions among Helsinki’s software companies thanks to its good references in a new market, and it is creating a new market in its field. I don’t know Aiforia very deeply, but the astronomical valuation level relative to revenue (EV/S >20) rubs me the wrong way. Even if everything goes excellently, part of this success is already baked into the share price. The number of shares will also likely increase because the cash won’t withstand current losses for very long.

To get onto the list of stocks that have 100-folded in ten years, one should likely look at small-caps and turnaround companies that have a product capable of a major breakthrough by disrupting or creating a new market. 10 years is a very short time for a 100-fold increase, so one would need to be able to buy the stock ridiculously cheap.

Nurminen Logistics

I’ll bring up Nurminen Logistics as a prospect, whose stock cost €0.25 in the summer of 2020 (the number of shares has increased). The company would thus have 6.5 years “left” to get its business into such a position that the stock would rise 19.5x, bringing the market cap to €1.95 billion. If the stock were priced at a P/E of 20x in 6.5 years, the net profit for the financial year would need to be €97.6M. Nurminen’s forecasted net profit for 2023 is €9.2M, meaning the net profit, or rather earnings per share, would need to grow 10.6x, or 44% annually. In this case, we would get help from multiples, but winner stocks are usually always helped by rising valuation multiples. Nurminen gets exceptional help from valuation multiples because, with the forecasted 2024 earnings, the P/E is 8x and even cheaper on a cash flow basis.

Nurminen has many business areas, but international rail transport is the most significant for the investment case. The current Trans-Caspian rail route has the greatest potential, while the China container train through Russia is currently on hold. As I understand it, Nurminen’s customers on the Trans-Caspian route are mostly Nordic companies.

Nurminen’s business doesn’t tie up working capital, and the ratio of Capex to operating cash flow is among the lowest on the exchange. The company has large annual depreciations (€5M), but annual Capex is only €1M, while operating cash flow is very close to EBITDA (€27M for 2024). In my opinion, the business model enables this “mega-winning.” In my own “bullero” (amateur/optimistic) calculations, the company will expand like bread dough in the coming years as this annually growing cash flow is used to develop the company through, for example, acquisitions. Acquisitions can be practically anything within the global logistics market, like the acquisition of North Rail closed in February 2023.

Fast forward three years: Cash flow has been used for acquisitions that have expanded internationally into interesting niches, enabling the development of new services and obtaining distribution channels for existing services. Volumes on the Trans-Caspian route have grown to a new scale, or the war in Ukraine has ended and the leader in the neighboring “paradise” has changed, bringing the train through Russia back to the table, which can be utilized with the grown customer base. Many companies trading with China would benefit from a rail connection. Additionally, a significant part of the value of China trade for countries other than Finland would be transported via trains organized by Nurminen, as was already seen in 2021. Nurminen can also utilize its subsidiary North Rail’s locomotives for traffic on the Finnish side.

Nurminen’s CEO has significant “skin in the game” and seems like a very pragmatic person whose words match his actions, and he also showed good capital allocation with the purchase of North Rail (a €21.5M equity acquisition for €9.2M).

I’m not saying Nurminen’s stock will yield 100x, but I thought I’d continue the discussion and give my two cents. A good book has also been written on the subject, which I recommend to everyone chasing 100-baggers:
100 Baggers: Stocks that Return 100-to-1 and How to Find Them

[Hades]

A 100-bagger in 10 years is such a wild thought that it’s probably worth breaking down the good examples from the opening into numbers more broadly.

Since the progression of a stock becoming a hundred-bagger can be calculated movingly easily with the formula:

(revenue growth x margin growth)^10 x valuation growth = 100

…the first step is naturally to clear out the simpler part, which is valuation. The table below shows how the growth of valuation multiples reduces the need for earnings growth.

Change in valuation multiples	Required EPS growth (CAGR) over 10 years
no change	58.5 %
2x	47.9 %
3x	42.0 %
4x	38.0 %
5x	34.9 %
6x	32.5 %

In my opinion, this best illustrates what an insane achievement we are talking about. Even after a “star leap” from P/E 10 > 60, earnings would still need to grow by more than 30 percent per year to reach the goal. At the other end, it shows that without multiple expansion, it’s futile to hope for 100-bagger status. I also suspect that even if someone could theoretically succeed in that, buying pressure would certainly follow a 50 percent EPS growth.

@Verneri_Pulkkinen mentioned P/E 10 as a good price in the opening—I personally see that on such a timeline, one would want to buy cases where a 5-6x leverage from multiples is realistic. That likely requires buying closer to P/E 5 levels. Even the world’s best, most efficient, and most admired compounders, which might already have a 100x return behind them, rarely trade above 40x—so if your starting point is P/E 15, it’s very difficult to get significant tailwind from multiples.

Then to the EPS growth. Everyone understands the importance of growth, but what kind does it need to be? Chris Mayer, who authored the book linked by @Iikka, speaks of growth with the phrase “growth in all dimensions,” referring specifically to margin growth alongside revenue. If I recall correctly, Mayer has voiced certain subtle criticism towards hyper-growth companies whose skyrocketing revenue is drowned in loss-making growth and shrinking margins.

The following table separates the net margin growth achieved over 10 years on the top row, and valuation multiple expansion in the left column. I left out the “valuation does not rise” scenario because it is not a realistic option for a 100-bagger. The table shows how much revenue must grow annually in different scenarios to achieve a hundredfold return.

Valuation growth / Margin growth	1.2x	1.5x	2x	2.5x	3x	4x
2x	45.2%	42.0 %	38.0 %	35.0 %	32.5 %	28.8 %
3x	39.4 %	36.4 %	32.5 %	29.6 %	27.2 %	23.6 %
4x	35.5 %	32.5 %	28.8 %	25.9 %	23.6 %	20.1 %
5x	32.5 %	29.5 %	25.9 %	23.1 %	20.9 %	17.4 %
6x	30.1 %	27.2 %	23.6 %	20.9 %	18.7 %	15.3%

By this point, everyone should see how brutal that 10-year window is. It’s perhaps questionable to include a column where net margin quadruples—it is a massive leap over a 10-year period—but it also tells us what this hunt is about: you must be able to avoid the stars that already have massive margins and start the doubling, tripling, or quadrupling from the very bottom. 2% → 8% is a change in a completely different ballpark than 15 → 60%, even if the impact is the same. Usually, strong growth leads to some kind of margin improvement automatically as certain fixed costs are spread over larger revenue, but you really have to fight tooth and nail for those tenths of a percent on every front.

The forum’s favorite child, Evolution, which became a hundred-bagger at its 2021 peak, is an exception regarding its starting profitability: a 25% net margin at listing, now 10 years later over 58%. A 133% increase in net margin in 9 years starting from the margins of a good software company—not bad. But when you understand the operating leverage inherent in Evo’s business, as well as Evo’s position and moats in the industry, even a child can see that not just anyone can improve in the same way from a 25% starting level.

Then one should also consider the impact of the share count (a value the chairman of the ‘Dividend Party’ conveniently forgot in the opening ). This would admittedly be an opportunity for another chaotic monologue regarding buybacks and dividends, but now is not the time. If we want a 100x return in 10 years, it can be generalized that all possible capital must be funneled into earnings growth. Dividends naturally don’t fit into this equation, and buybacks are also a bit hit-or-miss. If the share count can be reduced, especially in the early stages of the ten-year period, it certainly lowers the bar for earnings growth, but it’s probably not very typical for a large portion of cash flows to be used for regular profit distribution in this profile. Therefore, let’s summarize this criterion as: no dilution should occur, and buybacks are a plus.

In the same breath, a strong balance sheet can be added as a criterion: debt must not consume cash flows during the growth phase, and if necessary, there should be capacity to invest in new growth. Some companies need this more, others less—choose the preferred option. This is, of course, a fairly common-sense matter, but if you primarily buy companies with single-digit multiples, squeaky-clean balance sheets won’t exactly be lined up around the block.

Based on this, we can draft some grossly simplified example companies that become hundred-baggers:

Example 1: low valuation and buybacks

Year 0: revenue 100 million, net margin 4%, valuation multiple P/E 6, 1M shares
Year 10: revenue 800 million (8x, 23.1% CAGR), net margin 10% (2.5x), valuation multiple P/E 24 (4x), 800k shares (1.25x, approx. 2% CAGR [reduction]) = 100x.

Example 2: rapid growth

Year 0: revenue 100 million, net margin 6%, valuation multiple P/E 12, 1M shares
Year 10: revenue 1500 million (15x, 31.1% CAGR), net margin 15.6% (2.6x), valuation multiple P/E 30 (2.5x), 1M shares (1x) = 100x.

Example 3: hyper-growth

Year 0: revenue 100 million, net margin 3%, valuation multiple P/E 20, 1M shares
Year 10: revenue 2700 million (27x, 39.0% CAGR), net margin 7.5% (2.5x), valuation multiple P/E 30 (1.5x), 1.01M shares (0.99x [dilution]) = approx. 100x.

@Iikka

Are there other horses in the Helsinki stock exchange that could reach this?

In my opinion, the correct answer is “not even close.” Those growth requirements are so fierce that for almost everyone, the attempt collapses due to limited markets both domestically and perhaps even for international companies. A company like Gofore might be able to keep up in terms of revenue, but unfortunately, there won’t be enough tailwind from margins for the performance. Additionally, it must be remembered that for the dividend-venerating herd of companies in Helsinki, it is a mathematical impossibility to finance the necessary growth when everyone is accustomed to distributing all excess capital out of the companies. This game isn’t meant for everyone, and for most, profit distribution is better than rocket growth, but it’s still good to mention separately.

On the other hand, it could be said that in an efficient market, 100-baggers shouldn’t be available within a 10-year horizon, but someone always manages to surprise. The Nurminen you suggested seems at least to start from a valuation level where there could be a chance.

[Pohjolan_Eka]

Even though Verneri framed the topic nicely, I still want to slightly challenge the sensibility of this exercise. Finding a high-risk 100-bagger within ten years would be a doable task. You would have access to near-bankrupt turnarounds, cyclicals at the bottom of the cycle, speculative pharma companies, junior miners, etc. However, a 100-bagger in ten years combined with low risk is such a rare mythical creature that, especially at current historically high valuation levels, an investor might not even encounter one even if they screened stocks for 8 hours a day all year long. Wouldn’t it be much more meaningful to aim for the same end result by finding one stock every year for ten years that rises +58.5%? This isn’t a slam dunk either, but the number of stocks rising nearly sixty percent over the next year is so vast that an investor can seek and find them through something other than just luck.

@Iikka

Are there other horses in the Helsinki Stock Exchange that could achieve this?

Our entire stock exchange is so heavily focused on paying dividends that this is likely a practically impossible task. All capital should be allocated to growth or share buybacks for 10 years, and such a growth-oriented mindset doesn’t really belong to our local market culture. However, if I had to choose a domestic “low-risk company” with a gun to my head that could have a chance to 100-bag, I would choose Nexstim.

Nexstim is a medical technology company with a market cap of 17 million euros that has developed a non-invasive brain stimulation technology called SmartFocus®. It is a 3D-navigated transcranial magnetic stimulation (nTMS) technique that provides TMS targeting to a specific area of the brain. The technology is intended for the treatment of severe depression and chronic neuropathic pain, which is an absolutely massive and underserved market. The company is returning to a path of high and accelerating growth and will soon also turn profitable.

The company’s business model is inherently quite capital-light and highly profitable as a result of successful monetization.

€17M x 100 = €1,700M, which was Revenio’s market cap at the peak of the 2021 cycle. So, one would just need to repeat that amazing Revenio story, where a healthtech company with a market cap of a few tens of millions of euros breaks through globally with its top product, and hope that a new bubble market hits in the early 2030s. The goal would be significantly easier if the share issue expected from Nexstim in H1 2024 is realized, investor confidence is completely lost, and the share price is driven into the ground. For example, €10M x 100 = €1,000M, meaning €700 million less market cap would be needed for a 100-fold increase, which is a figure close to Revenio’s current market cap

https://www.youtube.com/watch?v=-JTiiC2Ir7w

[Verneri_Pulkkinen]

@Iikka

Excellent opening!

It would be interesting to hear, backed by solid arguments, if there are currently companies on the Helsinki Stock Exchange that theoretically have the potential to 100-fold.

@Hades

In my opinion, the correct answer is “not even close.” Those growth requirements are so wild that for almost everyone, things would fall apart due to limited markets, both domestically and perhaps even for international firms.

Thanks for the thought-provoking comments! =)

It’s smart to start scanning in our own backyard. And admittedly, I was thinking about the same group.

Qt could be a 100-bagger if we take 4 euros as the starting point. But a rise to 400 euros (which wouldn’t be a bad return from current levels either, by the way) would indeed require the company to succeed in its transformation into a general tool house for developers working with various screens and embedded systems. Perhaps not realistic in 10 years, but if the company’s hunger doesn’t fade, I wouldn’t say it’s impossible over a slightly longer timeframe. But, it requires a lot of optimism and faith.

Nurminen is ultimately a service company. Perhaps a 100-folding could indeed be possible from that penny stock category in the long run if the company opens up new routes, remains profitable, and the stock happens to drift into a suitable bubble, or if the company’s key personnel decide to retire by selling the company at a premium to an international logistics giant.

@Antti_Siltanen and @Antti_Luiro, biotech firms are admittedly obvious candidates, but they are very hard to understand. When you have the time, it would be fun to read short essays from you on the 100-folding potential of, for example, Aiforia, Nightingale, Nexstim, or Markku Jalkanen (I meant to write Faron :D) over a shorter timeframe than 49 years.

@Pohjolan_Eka

Wouldn’t it be much more meaningful to aim for the same end result by finding a stock once a year for ten years that rises +58.5%? This isn’t exactly a walk in the park either, but the number of stocks rising nearly sixty percent over the next year is so massive that an investor can seek and find them through more than just luck.

A valid point, but those cases fall into category 1 mentioned in the thread intro, where you trade in and out of positions over a few years’ timeframe. That is also a good (and difficult) strategy, but this thread focuses on sitting on rockets with fingers crossed.

[Verneri_Pulkkinen]

@Verneri_Pulkkinen

Observations, ideas, own research, reflections, and counter-arguments can be posted in this thread. If and when companies are found and the discussion becomes active, they can be spun off into their own company-specific threads.

After opening the thread, I got to work by running a stock screener with the following criteria:

-Under $10 billion market cap
-Last 5y EPS and revenue growth at least 10% per annum
-Over 50% gross margin
-Over 15% ROI
-And P/E max 30x.

With these criteria, I only found 15 companies to look at, but you have to start somewhere. Included was, among others, Inmode, which already has its own thread on the forum.

Perhaps this link works so that these arbitrary filters are included for others as well. Note: one doesn’t really look for multibaggers with these, but you have to start somewhere.

https://finviz.com/screener.ashx?v=111&f=cap_midunder,fa_eps5years_o10,fa_fpe_u30,fa_grossmargin_o50,fa_pe_u30,fa_roi_o15,fa_sales5years_o10&ft=4

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Since I rambled about the asset management industry in the latest Vartti, I decided to spend some time yesterday looking into Patria Investments (ticker symbol the peaceful PAX), which happened to be in the group.

Quick observations followed by some of my own thoughts.

Potential 100-bagger in 10 years
Possibly interesting otherwise
Difficult to understand

This is indeed a fast-growing asset manager registered in the Cayman Islands that focuses its investments on Latin America. The core team has been working together since the 80s. The company was listed on the stock exchange in 2021. Companies in the Cayman Islands have their own quirky features, such as the total lack of power for shareholders, criminally low tax rates, and numbingly long SEC reports. The company has two share classes, so it’s completely useless for a retail investor to complain to management about anything.

The market cap is a bit over two billion. At a quick glance, it feels very unlikely that this specific firm would be among the world’s largest asset managers with a 200 billion market cap. Could this be a 20 billion company someday if high growth continues? Perhaps.

The company focuses particularly on private equity (buying entire companies for a fund and developing them until they are sold forward or listed), infrastructure (e.g., buying hydroelectric plants), and credit (lending money to companies).

According to its own words, the company is one of the leading “alt houses” (alternative asset managers) focused on Latin America, but I’m so numb to the word “leading” that it doesn’t really mean anything.

Simply put, asset managers make money by raising funds from investors, charging a certain % fee on assets under management, and through performance fees. The larger the assets under management (AUM), the better.

The company’s AUM has grown impressively both organically and through acquisitions, though I haven’t had time or necessarily the skills to evaluate how profitable the acquisitions have been.

Since investments are focused on South America, the continent’s economy plays some sort of role in PAX’s attractiveness. The continent is large and growing, though politically unstable in places. PAX has managed to achieve excellent returns there even measured in dollars (local currencies are so-called “soft” currencies), but those are no guarantee of the future.

P/E on trailing earnings 18x and a dividend yield over 5%. Something to think about.

Addition: I wrote the word “observations” in the opening message. As I stated, this is likely not a 100-bagger based on a couple of hours of study, but being able to share observations about different companies with others encourages wading through F-20s and a couple of presentations. This way, even a quick look can be of use to others. Of course, if the company were an obvious bankruptcy candidate, the message could be skipped or summarized in a couple of sentences.

[Verneri_Pulkkinen]

At the risk of a tedious monologue, I want to raise one more point as to why this kind of reflection is useful: it makes you focus on the essential.

A huge amount of investors’ and (especially) analysts’ time is spent guessing next quarter’s EPS and tax rate. But those do not drive long-term returns.

This 100X project (I guess one could call it that) forces you to think about the long-term drivers for the company.

-How much potential do the company’s products have and how competitive are they (ROIC > WACC)?
-And will these competitive advantages last so that the company thrives 10 years from now and beyond?
-Does the company have the structures in place to scale many times larger?
-Is the company already investing in the next products/services, because the market potential for individual products isn’t limitless?
-Is the company’s management capable and skilled enough to grow the firm many times larger while creating shareholder value (anyone can buy endless revenue by financing acquisitions through share issues)?
-Is the stock valuation cheap enough that the multiple expansion excellently highlighted by @Hades is possible with relatively realistic expectations?
-What are the things I don’t understand about the company, and what could go wrong within a 10-year timeframe?

Happy hunting for a 100-bagger!

[Antti_Siltanen]

@Verneri_Pulkkinen

@Antti_Siltanen and @Antti_Luiro bio-firms are admittedly obvious candidates, but they are really hard to understand. When you have the time, it would be fun to read short essays from you regarding the possibilities of, for example, Aiforia, Nightingale, Nexstim, or Markku Jalkanen (meant to write Faron ) becoming 100-baggers in a shorter timeframe than 49 years.

Okay, speculation hat on then , all possible disclaimers in effect, and here we go:

TLDR summary: I would highlight BBS, Bioretec, and Faron from my own portfolio as the top three on the road to 100x. Since risk must also be considered, Bioretec has the lowest risk among these in my view.

BBS 100x = 930 MEUR. An obvious peer here is Bonesupport, which in about 20 years, with FDA approval for a few products and approximately 50 MEUR LTM sales, has reached a valuation of over 1 billion. Reaching that would require BBS’s product to prove significantly better in performance than competitors, expanding the product portfolio, obtaining marketing authorizations—especially in the US—and excellent success in global sales and marketing. A slowdown for multi-bagging is likely to be caused by several upcoming dilutive funding rounds. There is also much to build in the organization to strengthen sales and marketing as the company is only now shifting into commercial mode. In my opinion, more interesting peers than Bonesupport are Ossdsign and Kuros Biosciences, both of which have had a great early-stage start, but no more on them here.

Biohit: 100x = 2900 MEUR. Becoming a 100-bagger would require revenue to grow rapidly from the current level of about 10 MEUR to roughly 300 MEUR, whereby 10x P/S multiples would be reached, justified by 100x rapid growth. This is unlikely to happen with the current product portfolio, so Biohit would need to hit an R&D gold mine. The size of the gastrointestinal market is about 5 billion, meaning this would require Biohit to rise among the giants of the industry and/or succeed exceptionally well in expanding into new areas of diagnostics. Dilution is not likely.

Bioretec 100x = 4.8 billion. Bioretec has a fairly clear growth path with new technology that, at least on paper, has very clear advantages over existing products. The company also has a first-mover advantage in the US, moats created by FDA approval, and evidence of growing sales in the old product portfolio. Decent starting points, then. Weaknesses on the road to 100x include a lack of evidence regarding actual market demand for Remeos products and investment needs, which may mean one more funding round. If Bioretec reached its own goals, i.e., 62 MEUR in revenue, then with that growth, multiples could well be around 15x P/S and the market value thus 1000 MEUR. From there on, the product portfolio would still need to grow as we move into the 2030s, and there are markets left to conquer.

Faron 100x = 24 billion. A peer of sorts on the road to 100x could be Bioarctic, which has received good Ph3 results for Alzheimer’s disease, FDA approval last summer, and consequently a 2 billion EUR market value. This is for a large and little-contested indication. Faron would therefore require favorable Phase 3 results in the coming years for blood cancers and, based on those, FDA/EMA approvals, which could support a move toward a 10x valuation. To reach 100x, a licensing deal would be required to start BEXCOMBO-Ph2 for solid tumors and later complete Ph3, preferably with a wide range of different indications. These would need to yield extremely favorable results to enable a broad breakthrough in various solid tumor indications, and voila, the 100x is ready. On the risk side, a sensible licensing deal might not materialize, and crucial Ph3 trials may be delayed or left undone due to a lack of funding. Results could naturally fail to support market entry, and R&D risk is high regardless. Dilution remains fairly likely.

Nexstim 100x = 1700 MEUR. The LTM revenue of the three listed TMS manufacturers is about 100 MEUR. The market as a whole, including unlisted ones, could be roughly around 300 MEUR. I would estimate market growth to be high single-digits. In addition to TMS equipment, Nexstim could gain additional growth and markets by investing licensing income into clinic service companies, which would bring defensive but less scalable business alongside the equipment. Nexstim’s skyrocketing would, of course, require taking significant market share from competitors, of which clear signs have not yet been seen, at least in my opinion. The share capital may still be diluted; the need for an offering is 50-50.

Nexstim was referred to above. In our growth forecasts, it’s worth remembering that the forecasts include a 5-year licensing period, which brings a large part of the growth for the coming years 2024–2029. The forecast growth is therefore not entirely organic, and the currently known licensing agreement ends after 5 years.

Modulight 100x = 4600 MEUR. As a peer, the global laser giant Coherent Corp with a turnover of about 5 billion, whose market cap is 7.2 billion USD. Coherent operates in more or less all laser markets. (In my opinion, a more sensible peer is Lumibird SA, revenue about 200 MEUR and market cap 240 MEUR). Modulight’s growth path would, of course, require getting the top line growing, which relies on as-yet-unknown new openings. In a positive case, Modulight begins to get its lasers into use in significant quantities by various cancer and other clinics offering laser treatments. The company also rapidly implements its treatment-based pricing model and begins to receive substantial reimbursements of around €10k per treatment given. This is naturally highly scalable and justifies a significant expansion of current valuation multiples. On the risk side, the viability of the new business model has not yet been demonstrated in my opinion, and instead of growth, revenue has been on a downward curve. Future new openings could be small in terms of indications, and the use of lasers in their treatment could remain marginal and/or slow-growing. Dilution is not currently in sight.

Orion 100x = 620 billion. A hundred-fold increase for Orion would mean becoming the largest pharmaceutical company globally. A path toward this could emerge if Orion invested the proceeds from Nubeqa in the coming years into new drug development projects that, over a longer period, produced surprise successes in some category comparable to the current weight-loss drug boom.

[Hades]

Good point, but in my opinion, that depends quite heavily on what kind of investment you’ve made. If you buy a high-risk company whose business either develops or doesn’t, holding will likely become very difficult at the point when a positive signal hits the market and multiples go into orbit while the business performance follows slowly behind. Plug Power is probably a good example from a few years back—if I recall correctly, multiples drove 20-30x gains while profitability was still a long time coming.

If, on the other hand, you can buy an already profitable, so-called “good business” for cheap, holding is likely easier. I’ll take an example from my own portfolio: when I bought my first Fairfax shares in the summer of 2022, I got them at a P/B of 0.7. Since I know the company doesn’t pale in comparison to its competitors and average insurance conglomerates trade around a P/B of 1.5, I can hold through the first doubling of multiples without any issue, knowing it’s not a bubble. A second doubling would probably still be fine if the business develops well, but after that, challenging times begin as premium pricing grows to the level of, for example, an overpriced Sampo. It should be mentioned that I don’t see Fairfax becoming a 100-bagger from my purchase price.

With 100-baggers, there is the “problem” that few companies are simply so cheap at the time of purchase that a four- or five-fold increase in multiples would merely be a correction to the level of competitors. Domino’s Pizza is a good example of an exception, where the stock of a company that grew into an excellent restaurant chain quintupled its valuation to match the level of other large chains (roughly P/E 5 → 25). This is rare, however, which is why one must learn to tolerate that apparent expensiveness, but if you know your investment well, it’s entirely possible.

I think it’s worth mentioning that if things were to go so beautifully that multiples, say, 10-fold in the early stages while EPS growth was still in its infancy, the most sensible investment decision could often be to sell the shares. A 100-bagger isn’t an end in itself if the risk-adjusted expected return remains low after a rapid expansion in multiples.

[Sijoittaja-alokas]

@Verneri_Pulkkinen

As the thread starter, I hope that every comment is analytical and well-considered. More substantive content has been requested for the forum, and since I am starting this thread myself, I dare to demand even more from the content.

The challenge has now been issued.

Let’s especially remember this part of the opening post. This thread contains excellent posts with interesting information and good reflection that provide added value.

Ideally, let’s avoid offhand remarks in the thread that do not provide specific added value and are more or less self-evident.

If you have a light question or comment in mind, it’s good to learn this feature:

Ohjeita Foorumin käyttöön foorumilaisille

Messages have been deleted and are being moved. Let’s read the opening post carefully, as well as the messages that followed, and take time and thought when writing a post to this thread. That is, keep in mind that the message fits the thread, doesn’t stray off-topic, and provides added value to other investors.

Thank you for your understanding and have a great discussion!

[Tasaraha]

When thinking about how and what kind of companies achieve a 100x market value, it’s probably good to review where they come from and why.

The Jenga team (!) has conducted a study where they looked for common characteristics among 100x companies out of 55,000 global public companies.
Global Outperformers - Jenga Investment Partners (jengaip.com)

The study is quite easy to read, and I encourage you to check it out. This should provide a good basis for thinking about how to hit the 100x group in the future, what can be learned from previous growth companies, and how we would advise a dart-throwing monkey to aim better in the future!

• Out of 55,000 stocks, 446 returned 100x, meaning a dart-throwing monkey had a 0.8% probability of hitting a 100x stock globally in 2012.
• Most of the 446 were profitable companies! So, the monkey shouldn’t have aimed for those that had been loss-making for years.
• A 100% CAGR was not needed for revenue growth. A 20% CAGR was already very sufficient for a company to eventually become a 100x.
• Most of the companies also grew their operating profit, and most of them more than their revenue.
• Most companies also had an initial EV/EBIT between 0-15; in other words, they were cheap if they had 20% profitable growth. Too much wasn’t paid for growth!
• The company’s lifecycle and growth phase matter! The monkey should aim for companies with a market cap under 300M USD. Small companies were clearly overrepresented among the 446 100x companies.
• The company’s home market matters: India, Sweden, Japan, Germany, and Israel were more likely to produce a 100x company than China, the USA, or the UK.
• Three companies from Finland, including Neste and Revenio, were on the list of 446.
• Sweden—the top-performing country in this study—produced about twenty 100x companies.

So, it’s probably not impossible at all that 100x companies will come from the Nordics over the next 10 years, and they are already on the list! I would bet that companies solving climate issues, or problems in the software industry or the medical field, would be a good area for probabilities.

There are about 16,000 companies on the Nordic list. If you look at this with a screener: <300M EUR micro-cap market cap, 0-20 EV/EBIT, 0-30% revenue growth, >0% profit margin, you get a group of less than a hundred.

From there, it’s just a matter of picking the next 100x. With these probabilities, a couple of 100x might be found on the list! Easy as pie

[Deep_Value]

@Pohjolan_Eka

A 100-bagger in ten years combined with low risk is such a rare mythical creature,

Excellent thread, but I completely agree with Eka. Throwing in “low risk” at the end initially gives off a slight bullero (naive retail investor) vibe, but let’s interpret the comment charitably to mean that we aren’t looking for lottery tickets, but rather a radically mispriced company with a justifiable path to becoming a compounder.

In hindsight, what would be the lowest-risk 100-bagger in history?

Amazon:

Monster beverage:

Xpel:

Microsoft:

Apple:

The low-risk 100-bagger does not exist. In practice, you have to buy against the prevailing market narrative; naturally, this is priced into the quote and the stock can be bought cheap. For the average visitor on the forum, the mere mention of the company’s name should make them feel a bit sick. After that, you have to be right and be able to withstand violent share price volatility. If the most important lesson from last year was to have stop-losses ready at a -20% drop, then with “paper hands” like that, it’s useless to try and buy and hold such a stock.

At the moment, perhaps Tecnotree could fit into this category if it could unexpectedly turn its cash flow around in the future. This is a very big if. In a difficult economic situation, however, revenue has been growing continuously, as has the profit (excluding '22). Based on next year’s forecasts, EV/S is approaching one and EV/EBIT is approaching 4. Just mentioning the company’s name causes an upset stomach on the forum, and the hatred is priced into the share price. On top of this, you’d need the success of growth investments, accelerating growth, and a sticky product that is difficult for the customer to switch from.

I’ll set a reminder for 2034 so I can come back and laugh at the mere idea.

[Roope_K]

If you’re looking to find a 100-bagger in pharma, I can highly recommend this latest Acquired podcast, which goes through Novo Nordisk’s journey to becoming a likely 100-bagger.

Around the middle of the episode and for the entire rest of the episode, they discuss the kind of odds a pharma lottery player is up against if they intend to find 100-bagger candidates from the early pre-phase research stage. It’s likely easier to find gold in Lemmenjoki than a pharma stock that breaks out to be a 100-bagger.

Novo Nordisk (Ozempic) | Acquired Podcast

[poutapilvia]

The sentiment in this thread is quite strongly that no 100-baggers can be found in Helsinki, so let’s put on our tinfoil hats, snort some coke, and swim against the current a bit just for fun. At least one firm in Helsinki comes to mind that has dropped significantly from its peaks, is popular on the Forum to some extent, and has a clear runway to become a 100-bagger. Ladies and gentlemen,

Talenom: A European Accounting Giant

In Talenom’s comprehensive report, @Juha_Kinnunen mentions that Talenom’s TAM in Finland, Sweden, and Spain is roughly 15 billion rounded. If we extrapolate the TAM for the whole of Europe, it is likely around 100–200 billion. Let’s assume a market of 200 billion and market growth slightly faster than GDP (3%) for the next 10 years, making the European TAM 270 billion. Talenom’s market cap (M-A) is currently 264 million. 100x this is 26.4 billion, which is almost 10% of the TAM, even without taking profit into account in the meantime. If we assume a P/EBIT of 25 for Talenom at that point due to a good growth track record and high margins, then EBIT would need to be around 1 billion, which is ~66x this year’s estimated EBIT in 10 years. Talenom’s P/EBIT is currently around 17, so the multiples would rise a bit. As I said, pondering this exercise requires something stronger than coffee, but bear with me.

How is this kind of madness possible? The biggest key compared to the past is proving Talenom’s Finnish success abroad, i.e., hitting a 20%+ EBIT margin. The steps:

1. Get all the dividend-obsessed key personnel out of the firm. The money should be used for growth.

2. The strategy is proven to work in Sweden, and the country’s EBIT % grows to the Finnish level. At this stage, investors realize that Talenom’s strategy works → multiples go up.

3. Because the accountants working at Talenom can maintain more customers than average (= more money for the accountant), the firm’s reputation as an employer and owner of businesses rises. Organic growth is good, and with high multiples, inorganic growth can continue with relatively low dilution.

4. Talenom has proven it knows how to expand into a new country, deploy its own software there, and hit a 20%+ EBIT. Now this same game needs to be played in a few other European countries until 1 billion EBIT is achieved. The key to this growth is the “Stone Age” countries of Southern Europe. What does that require?

Assume that all of Talenom’s countries produce the aforementioned results. To reach 1 billion EBIT, revenue must be 5 billion (~2% of the entire European TAM). This year’s forecast revenue is 136.8 million. A 10-year CAGR for that would be about 43%

The moral of the story:

• Acquisitions made with stock dilute ownership, so in reality, growth would need to be even faster than this!!

• We are unlikely to get rid of dividends.

• Growth relies on rising valuation multiples (partly speculative).

• For 100-baggers, it’s good for initial multiples to be low for the target to be possible.

• 10 years is a very short time for this challenge. According to the vision above, Talenom would only have a 2% market share in the European accounting field at the end. Doesn’t sound too bad to me, but achieving that position in 10 years is probably an impossibility. In 20 years, it should be achievable with a CAGR of “only” ~20% y-o-y.

Thank you and sorry.

Disclaimer: Numbers include rounding errors

[Lokis]

An excellent thread!

As has been stated here several times already, low risk and 100-bagging don’t really go together unless you happen to have an iron stomach and diamond hands, and find a transformation story like Revenio Group for next to nothing, HODL the stock to the peak of the bubble, and let go exactly, or almost at the right time. Revenio increased 40-fold in 10 years (2011-2021) and I even got to enjoy that journey myself from 2013-2020. In the end, this case left me with a bad feeling for a long time because I didn’t understand to add enough along the way and I also exited the position too early. Otherwise, sitting through the ride was very easy until I started following the market daily. Until 2010, I glanced at my portfolio maybe once a month and only read reports and news of the companies I owned and followed.

removed

First of all, I bet that a 100-bagger will be found in the Nordic markets. There are many interesting potential disruptors on Stockholm’s growth lists, although many of them are still expensive. From Helsinki (Hesuli), on the other hand, you can find many very cheap “cigar butts,” one of which could pull off a Revenio-like stunt and create new “simpletonaires” (pölhönäärejä).

My own bet, however, is a Swedish former hype stock, a forum favorite, and later a pariah: Smart Eye. Due to lack of time, I will only write briefly about the case and mainly from a qualitative perspective. You can marvel at the numbers more closely in the company’s own thread and the analyses of the world’s most reliable Swedish analysis house. As an off-topic, I’ve wondered why the house’s name is specifically Redeye (punasilmä)? I think the previously mentioned “flour” (jauho) is significantly relevant to the choice of name, and the use of said stimulant in unreasonable amounts also likely belongs as an essential part of the forecast preparation process.

In any case, that famous can of the Smart Eye story was kicked for a long time, but in the last few quarters, development has been strong and in line with forecasts. Current revenue growth drivers are DMS (Driver Monitoring System) and sold research work. Both are based on 25 years of accumulated expertise and data on reading human gestures and especially eye movements. DMS generates high gross margin revenue per DMS-equipped car pushed out of customer production. The cost structure of revenue in this segment is very front-loaded, as the main costs consist of sales work and adapting the solution to each car model. Research sales not only accumulate cash but also data that can be utilized for product development and potential new technological innovations. Regulation strongly supports the sale of DMS solutions globally. DMS could solve various road safety problems, such as smartphone use while driving and driving under the influence.

Interior sensing technology is planned as the next spearhead, as DMS returns might cool down when it becomes a standard solution in the medium term. The potential of interior sensing is hard to assess, as it is practically still in the product development stage. I personally don’t see the technology as a “necessary” solution for road safety in the same way as DMS, but as autonomous driving develops, the technology could become an essential part of enabling autonomous driving. I personally believe that Smart Eye’s technology will be utilized more in the future in human psychology research and robotics as machines interacting with humans develop. I don’t believe any other company in the world has as extensive and “old” a database of said data.

The company’s MCAP is 252.85 million euros at Friday’s quote, so a 100-fold increase would mean just over 25 billion in ten years. Revenue for the last year was 23.37 million euros and EBITDA -17.6 million euros. Let’s throw a P/S of 5 ten years into the future, and revenue should be around 5 billion. If the EBIT margin were a high 20%, EBIT should be around a billion, which would mean a result of about 750 million after taxes (assuming the company would be debt-free by then). At that point, the P/E would be about 33. Revenue would therefore have to increase about 108-fold, meaning about 1.6-fold every year for ten years. Do I consider this likely, or even possible? Well, the chance for this is more than zero, and a 0.1% probability is infinitely more than zero, so in principle, yes.

Not investment advice, and I still own shares (pahveja) of said company.

Edit: removed a tasteless quip at the request of the moderators

[Verneri_Pulkkinen]

@Deep_Value

Excellent thread, but I completely agree with Eka. The “low risk” throwaway line at the end initially gives a slight naive bull (bullero) vibe, but let’s interpret the comment in the best possible way to mean that we’re not looking for lottery tickets, but for a radically mispriced company that has a justifiable path to becoming a compounder.

In hindsight, what would be the lowest-risk 100-bagger in history?

@Lokis

Very great thread!

As has been noted here several times already, low risk and 100-bagging don’t really go together, unless you happen to have a stomach of iron and diamond hands, and find a transformation story like Revenio Group for next to nothing, HODL the stock to the peaks of the bubble, and let go at exactly, or almost at, the right time. Revenio increased 40-fold in 10 years from 2011-2021 and I personally got to enjoy that journey from 2013-2020.

Thanks to all participants!

I deliberately framed the title of the thread to be a bit provocative. According to financial theory, risk and return go hand in hand. Fortunately, I haven’t taken a single finance course and have no formal business education, so such teaching doesn’t limit my imagination.

But common sense can and should be used. If some investment salesman were to offer a risk-free 100-bagger, one should suspect this:

@Sauli_Vilen

But as the participants in the thread correctly guessed, I’m looking for situations where, with bad luck, losses would be limited. For example, Revenio in the early 2010s. If the company had remained a conglomerate and Icare hadn’t taken off, the investor would hardly have taken a big hit (duffe) on shares bought at around book value.

Such cases have indeed existed and have been seen with my own eyes. A 100-bagger with reasonable risks in terms of fundamentals (stocks can always fluctuate anywhere in the short term) is no Loch Ness monster that no one has ever caught. It just takes time and a lot, a lot of… luck and staying power.

Instead, the companies excellently mentioned by @Antti_Siltanen are, for all their potential, more “lottery ticket-like,” meaning in a bad situation, you could take a big hit. This risk can, of course, be limited by having a relatively small position size in the portfolio.

[LakeBoodom]

Personally, I would look for a 100-bagger from the US and from a large sector ripe for disruption. From my own holdings, Hims & Hers, SoFi, and Lemonade come to mind. They are all trying to disrupt massive sectors—healthcare and pharma services, banking, and insurance—with a digital-first approach. Furthermore, their market caps are all small enough, between 1–8 billion.

As a very controversial boom-or-bust pick, I’ll suggest Carvana. If—and it’s a big if—the company survives its debts, restarts growth, and achieves positive cash flow, there is a massive amount of upside. Currently, its market share is only around 1% of the total used car market. What if it reached an Amazon-like 20%?

The European ”Carvana,” Auto1 Group, could also be a candidate. Both dealers also possess the optionality to expand their business beyond just selling used cars in the future.

In other sectors, like consumer goods, I would look for the next Celsius (or Monster). These can be very difficult to spot from Finland if you can’t “Lynch” the products yourself. Finding the next Chipotle or Starbucks would fall into a similar category. Companies like Puuilo and similar ones hit growth ceilings in the domestic market very quickly here, and international success in the retail market is painfully difficult, especially for Finnish firms.

[Tunturisusi]

Let’s throw in Panostaja as a wild card—the eternal plodder. If CoreHW’s own products break through, the valuation could be anything. It’s another matter how likely that is.

Panostaja’s total market cap is approx. 23 million.
A good start for this “bagger” potential would be the CoreHW CEO’s target for growing the company: from under 10M revenue to 100M in 3 years. Furthermore, the margins on their own products are quite substantial, so it would scale nicely to the bottom line. The industry is also appropriately “hot” for the times…

Tampelaisyritys Core HW aikoo tehdä valtavan kasvupompun: vain neljässä...

Not likely, but not impossible either.

CoreHW’s business is divided into design services, consulting, and the development of their own microchips and licensable technologies (IP). The company’s customers include network companies, chipset manufacturers, module manufacturers, and wireless technology device companies offering IoT (Internet of Things) solutions.

They are definitely putting resources into growth now. Panostaja, together with Business Finland, invested about four million euros into CoreHW’s R&D in the spring of 2023. Business Finland’s funding is directed toward finalizing the product family and package, while Panostaja’s share is for developing the commercial side and capabilities.

CoreHW hakee vahvaa kasvua maailmalta   - Panostaja

This indoor positioning technology and the related first potential proprietary product are what the commercialization efforts are focusing on. Where can this be utilized?

Warehousing/logistics: The solutions improve warehouse reliability and safety by providing real-time package location, inventory tracking, and highly accurate forklift positioning.

Airports and hotels can track heavy equipment, passenger luggage, and visitors to improve daily operations, increase security, enhance customer satisfaction, and boost efficiency. Algorithms can be used to monitor where and when it’s worth investing labor/resources.

Access control and security: Indoor positioning solutions allow for tracking the movement and entry of employees and visitors in any space.

Retail: Shopping malls benefit from this technology by tracking shopping carts and providing consumers with guidance and routes in large stores. Large retail chains are surely interested in this as well. By understanding customers’ primary routes, they can place advertising and key products along those paths. Personalized advertising also becomes easier.

Health centers: With this technology, patients as well as equipment like beds and wheelchairs can be easily located. This is also a safety factor, alongside operational efficiency.

The use cases are almost limitless.

CoreHW is also developing technology for home monitoring and smart locks, as well as radar and sensor technology for the automotive industry.

Additionally, CoreHW is involved in many consortia. Developing chip manufacturing for Europe.

Tamperelainen RISC-V-piiri tuotantoon – Uusiteknologia.fi

[Verneri_Pulkkinen]

@LakeBoodom

Personally, I would look for a 100-bagger in the US and in a large sector that is being disrupted. From my own holdings, Hims and Hers, SoFi, and Lemonade come to mind. All are trying to disrupt massive sectors – medical and pharmaceutical services, banking, and insurance – with a digital approach. Additionally, their market caps are all small enough, 1–8 billion.

As a very controversial boom-or-bust pick, I’ll throw in Carvana.

Could you elaborate on these companies a bit more, see the thread starter:

@Verneri_Pulkkinen

As the thread starter, I hope that every comment is analytical and well-considered. More substantive content has been requested for the forum, and when I start a thread myself, I feel even more emboldened to demand more from the content.

And the same:

@Tunturisusi

As a wild card, let’s throw in the eternal plodder Panostaja. If CoreHW’s own products break through, the valuation could be anything. It’s another matter how likely such a thing is.

Otherwise, casual guesses can be posted here (this thread was a slightly surprising opening :D).