6 Multibagger Technology Stocks based on Coffee Can Investing

Technology stocks have been rocking either pre covid or during covid pandemic. These stocks have been generating good wealth to investors in short to medium term. Investors always have a question whether such companies are really growing or is it just a hype that is getting created among these technology / IT stocks. Coffee can investing can help you to filter the growth stocks based yearly revenue growth, RoCE and several other key parameters. What if you are able to filter such stocks which also delivered superior share price returns in the last 1 year and last 3 years? In this article we would provide 6 Multibagger Technology Stocks which have passed Coffee Can investing guidelines and also rewarded with share price performance in the short term 1 year to 3 years.

Multibagger Technology Stocks based on Coffee Can Investing

Also Read: 5 Multibagger Stocks – Doubling every 4 years

What is Coffee Can Investing?

Coffee Can Investing indicates that one can invest in companies with “buy and forget” approach which have consistently performed well in the last 10 years.

Primarily, it is long term investment strategy.

Robert K Kirby has coined this term “Coffee Coin Investing” in 1984. Earlier in Old America, people used coffee cans for storing all important things. Then these cans were hidden beneath mattress. This system was prevalent before the banking system was formed.

This is how this concept has been emerged. In Indian context, Mr. Saurabh Mukerjee indicated in this book, “The unusual Billionaires”.

How to filter stocks based on Coffee Can Investing?

Here the parameters that need to be considered in filtering these stocks.

The company is in existence for at least 10 years.

Revenue growth should be at least 10% year on year.

ROCE should be at least 15% for the last 10 years.

The company should have good brand value.

Market capitalization should be at least Rs 100 Crores. Since this size is very small and there could be hundred’s of stocks that would emerge with this criteria, we have taken giant stocks only in this article.

Beyond this we have added a filter that such companies share price is appreciated by over 20% returns in last 1 year and 80% over last 3 years.

6 Multibagger Technology Stocks based on Coffee Can Investing

Here is the list of tech stocks based on coffee can investing.

#1 – L&T Infotech

#2 – Infosys Technologies

#3 – Wipro

#4 – HCL Technologies

#5 – Tech Mahindra

#6 – Tata Consultancy Services

6 Multibagger Tech Stocks – Financials & Share Price Performance

#1 – L&T Infotech – CMP Rs 6,036

Larsen & Toubro Infotech Limited offers an extensive range of IT services like application development, maintenance and outsourcing, enterprise solutions, infrastructure management services, testing, digital solutions, and platform-based solutions to the clients in diverse industries.

Coffee Can Investing Check

Sales Growth > 10% – This company actual’s – 19%

Return on Equity > 15% – This company actual’s – 27%

Average return on capital employed in last 10 years > 15% – Company actuals are 44%

Financial Performance

Its consolidated revenues have increased from Rs 6,500 Crores in FY17 to Rs 12,369 Crores in FY21.

Its consolidated profits have increased from Rs 970 Crores in FY17 to Rs 1,938 Crores in FY21.

Even its recent quarterly results indicate that its revenue increased from 3,152 Crores (Qtr ending Dec-20) to Rs 4,137 Crores (Qtr ending Dec-21). Its margins have improved from Rs 519 Crores to Rs 612 Crores for a similar period.

Positive Factors in this company

Strong revenue growth in the last 5 years.

Strong margin growth in the last 5 years.

Company with low debt.

Company cash flow from operations is increasing in the last 2 years.

Book value per share is improving in the last 2 years.

Company with zero promoter pledge.

Some of the stock brokers have recommended to buy this stock in the last one quarter.

Risk Factors in the stock

ROE is declining in the last 2 years.

Promoter is decreasing their shareholding in recent times.

Performance of Share Price

1 year returns – 54%

3 years returns – 263%

This tech company has passed Coffee Can Investing formula test and its share price performance indicate that it also generated handsome returns to investors i.e. 2.5x returns in last 3 years.

#2 – Infosys – CMP Rs 1,887

Infosys Limited is a provider of consulting, technology, and next-generation digital services, enabling clients to execute strategies for their digital transformation. They help their clients in the digitization of processes, migration to cloud-based technologies, workplace transformation, business model transformation, enhanced cybersecurity controls, and cost structure optimization in IT. It was incorporated in Pune, their head office is in Karnataka. It has a presence in 46 countries across 220 locations.

Coffee Can Investing Check

Sales Growth > 10% – This company actual’s – 19%

Return on Equity > 15% – This company actual’s – 27%

Average return on capital employed in last 10 years > 15% – Company actuals are 34%

Financial Performance

Its consolidated revenues have increased from Rs 68,484 Crores in FY17 to Rs 100,472 Crores in FY21.

Its consolidated profits have increased from Rs 14,383 Crores in FY17 to Rs 19,423 Crores in FY21.

Even its recent quarterly results indicate that its revenue increased from 25,927 Crores (Qtr ending Dec-20) to Rs 31,867 Crores (Qtr ending Dec-21). Its margins have improved from Rs 5,215 Crores to Rs 5,822 Crores for a similar period.

Positive Factors in this company

Strong revenue growth in the last 5 years.

Strong margin growth in the last 5 years.

Company with no debt.

Company with zero promoter pledge.

Company cash flow from operations is increasing in the last 2 years.

Book value per share is improving in the last 2 years.

Some of the stock brokers have recommended to buy this stock in the last one quarter.

FPI / FIIs are increasing their shareholding in the recent times.

Risk Factors in the stock

ROA has declined in the last 2 years.

Performance of Share Price

1 year returns – 40%

3 years returns – 154%

This tech company has passed Coffee Can Investing formula test and its share price performance indicate that it also generated handsome returns to investors by rewarding with 1.5x returns in last 3 years.

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#3 – Wipro – CMP Rs 604

Wipro Limited is a global Information technology, consulting and business process services (BPS) company. It is the 4th largest Indian player in the global IT services industry behind TCS, Infosys and HCL Technologies.

Coffee Can Investing Check

Sales Growth > 10% – This company actual’s – 21%

Return on Equity > 15% – This company actual’s – 19%

Average return on capital employed in last 10 years > 15% – Company actuals are 22%

Financial Performance

Its consolidated revenues have increased from Rs 55,448 Crores in FY17 to Rs 61,934 Crores in FY21.

Its standalone profits have increased from Rs 8,517 Crores in FY17 to Rs 10,855 Crores in FY21.

Even its recent quarterly results indicate that its revenue increased from 15,670 Crores (Qtr ending Dec-20) to Rs 20,315 Crores (Qtr ending Dec-21). Its margins slightly dropped from Rs 2,987 Crores to Rs 2,964 Crores for a similar period.

Positive Factors in this company

Good revenue growth in the last 5 years.

Good margin growth in the last 5 years.

Company with low debt.

Company with zero promoter pledge.

Company cash flow from operations is increasing in the last 2 years.

Book value per share is improving in the last 2 years.

RoCE is improving in the last 2 years.

RoE is improving in the last 2 years.

RoA is improving in the last 2 years.

Some of the stock brokers have recommended to buy this stock in the last one quarter.

FPI/FIIs are increasing stake in the share holding.

Risk Factors in the stock

Promoter is decreasing their shareholding in recent times.

Recent quarter results indicate a slight dip in margins compared to last year same quarter.

Performance of Share Price

1 year returns – 49%

3 years returns – 135%

This 4th largest tech company in India has passed Coffee Can Investing formula test and its share price performance indicate that it also generated handsome returns to investors by doubling in last 3 years.

#4 – HCL Tech – CMP Rs 1,169

HCL Tech is a leading global IT services company, which is ranked amongst the top five Indian IT services companies in terms of revenues. Since its inception into the global landscape after its IPO in 1999, HCL Tech has focused on transformational outsourcing, and offers an integrated portfolio of services including software-led IT solutions, remote infrastructure management, engineering and R&D services and BPO. The company leverages its extensive global offshore infrastructure and network of offices in 46 countries to provide multi-service delivery in key industry verticals.

Coffee Can Investing Check

Sales Growth > 10% – This company actual’s – 11%

Return on Equity > 15% – This company actual’s – 20%

Average return on capital employed in last 10 years > 15% – Company actuals are 30%

Financial Performance

Its consolidated revenues have increased from Rs 47,568 Crores in FY17 to Rs 75,379 Crores in FY21.

Its consolidated profits have increased from Rs 8,604 Crores in FY17 to Rs 11,169 Crores in FY21.

Even its recent quarterly results indicate that its revenue increased from 19,302 Crores (Qtr ending Dec-20) to Rs 22,331 Crores (Qtr ending Dec-21). However, its margins have dropped from Rs 3,977 Crores to Rs 3,448 Crores for a similar period.

Positive Factors in this company

Strong revenue growth in the last 5 years.

Strong margin growth in the last 5 years.

Company with low debt.

Company with zero promoter pledge.

Cash flow from operating activity has increased in the last 2 years.

Some of the stock brokers have recommended to buy this stock in the last one quarter.

Risk Factors in the stock

ROE, RoCE and RoA is declining in the last 2 years.

Performance of Share Price

1 year returns – 22%

3 years returns – 115%

This top 5th technology company in India has passed Coffee Can Investing formula test and its share price performance indicate that it also generated handsome returns to investors.

#5 – Tech Mahindra – CMP Rs 1,524

Tech Mahindra Limited provides a comprehensive range of IT services, including IT enabled services, application development and maintenance, consulting and enterprise business solutions, etc. to a diversified base of corporate customers in a wide range of industries.

Coffee Can Investing Check

Sales Growth > 10% – This company actual’s – 12%

Return on Equity > 15% – This company actual’s – 19%

Average return on capital employed in last 10 years > 15% – Company actuals are 25%

Financial Performance

Its consolidated revenues have increased from Rs 29,140 Crores in FY17 to Rs 37,855 Crores in FY21.

Its consolidated profits have increased from Rs 2,853 Crores in FY17 to Rs 4,351 Crores in FY21.

Even its recent quarterly results indicate that its revenue increased from 9,647 Crores (Qtr ending Dec-20) to Rs 11,450 Crores (Qtr ending Dec-21). Its margins have increased from Rs 1,289 Crores to Rs 1,378 Crores for a similar period.

Positive Factors in this company

Strong revenue growth in the last 5 years.

Strong margin growth in the last 5 years.

Company with low debt.

Company with zero promoter pledge.

Book value per share is increasing in the last 2 years.

FPI/FIIs are increasing stake in the share holding.

Some of the stock brokers have recommended to buy this stock in the last one quarter.

Risk Factors in the stock

ROE is declining in the last 2 years.

Company is incurring costs year on year for long term projects.

Promoters decreasing their share holding.

Company not able to generate net cash.

Performance of Share Price

1 year returns – 54%

3 years returns – 97%

This top 4th technology company in India has passed Coffee Can Investing formula test and its share price performance indicate that it also generated handsome returns to investors.

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#6 – Tata Consultancy Services – CMP 3,701

Tata Consultancy Services (TCS) is part of Tata group. It is an IT services, consulting and business solutions organization that has been partnering with many of the world’s largest businesses in their transformation journeys for over 50 years. TCS offers a consulting-led, cognitive powered, integrated portfolio of business, technology and engineering services and solutions.

Coffee Can Investing Check

Sales Growth > 10% – This company actual’s – 15%

Return on Equity > 15% – This company actual’s – 39%

Average return on capital employed in last 10 years > 15% – Company actuals are 48%

Financial Performance

Its consolidate revenues have increased from Rs 117,966 Crores in FY17 to Rs 164,177 Crores in FY21.

Its consolidated profits have increased from Rs 26,357 Crores in FY17 to Rs 32,562 Crores in FY21.

Even its recent quarterly results indicate that its revenue increased from 42,015 Crores (Qtr ending Dec-20) to Rs 48,885 Crores (Qtr ending Dec-21). Its margins have improved from Rs 8,727 Crores to Rs 9,806 Crores for a similar period.

Positive Factors in this company

Strong revenue growth in the last 5 years.

Strong margin growth in the last 5 years.

Company with zero debt.

RoCE is improving in the last 2 years.

Company cash flow from operations is increasing in the last 2 years.

Some of the stock brokers have recommended to buy this stock in the last one quarter.

Risk Factors in the stock

ROA is declining in the last 2 years.

Company not able to generate net cash.

Increasing trend in non core income.

Performance of Share Price

1 year returns – 21%

3 years returns – 85%

While it has passed Coffee Can Investing formula test, its share price performance indicates that it also generated stable returns to investors in the last 3 years.

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3 comments

  • Kamal Garg

    Taking a filter of 100 cr market cap is very less and then selecting six giant cap companies may have given a list of only best in class working of six giant cap IT companies. Even selecting a filter of 15% ROCE is also too low because even from your list, the least ROCE is at 22% in case WIPRO.
    It is requested to divide your list into three parts :
    1. Market cap of 2000 to 5000 cr
    Market cap of 5000 to 10000 cr and
    Market cap of more than 10000 cr.
    The objective and idea here is to generate a list of small, emerging and established players respectively as per the above market cap criteria, in the IT space which would give some direction to our decision making process.
    2. ROCE filter at 20%. Or better even between 20 to 30%, 30 to 40% and 40% and above based upon the above-based market cap criteria.

    The objective and idea here is to generate a list of small, emerging and established players in the IT space.

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