The Compounded Annual Growth Rate (CAGR) is used to calculate the average annual growth rate of an investment over a specified time period, considering that the growth is compounded.
It reflects the cumulative performance of a certain investment or variable over a significant period of time and is used to assess the relative profitability of companies.
Recently, Jefferies, a New York-based global brokerage firm, released a list of 11 stocks—Amber Enterprises, Ambuja Cement, Axis Bank, Bharti Airtel, JSW Energy, L&T, Macrotech, Max Healthcare, SBI, TVS Motors and Zomat—that are expected to deliver strong CAGR returns of 15% to 25% over the next five years.
Among these stocks, the brokerage expects the following three will provide a CAGR of more than 20% over the next five financial years.
Amber Enterprises India Limited
Share price of Amber Enterprises closed at Rs. 3,552.35 on Friday and the brokerage firm has given a ‘buy’ rating with a 5-year target price of Rs. 9,740, representing a 174.18 percent upside and CAGR returns of nearly 23% over FY24-29 from the closing price.
Share price of the company jumped by nearly 5.76 percent on BSE to Rs. 3,605 in the trading session of March 22nd, from its previous close of Rs. 3,408.65.
According to the brokerage’s analysis, Amber Enterprises is expected to benefit from India’s manufacturing growth story and is the brokerage’s top pick in the small and midcap space.
The core competency of the company in ACs and diversification into components, together with the PLI scheme, will result in a CAGR of 36% over FY24-29 in terms of earnings.
The company has delivered a positive return of around 19.8 percent in the last six months, and nearly 96.1 percent in the last one year. So far, it has given around 13.2 percent returns in 2024.
Established in 1990, Amber Enterprises India Limited is the market leader in the Indian Room Air Conditioner (RAC) industry, with a presence across both, the components space and finished goods, in the HVAC industry.
Axis Bank Limited
Share price of the bank closed at Rs. 1,034 on BSE and the New York-based brokerage firm has given a 5-year target price of Rs. 2,810, implying a 171.7 percent upside and CAGR returns of 22.13% over FY24-29 from the closing price.
With a market cap of Rs. 3.19 lakh crore, the share price of Axis Bank jumped by nearly 1.25 percent on BSE to Rs. 1,047 in the trading session of Friday, from its previous close of Rs. 1,036.2.
According to CNBC, the brokerage expects the bank to witness a 17 percent loan and 18 percent Earnings Per Share (EPS) of CAGR during FY24-29, which is possible owing to an improvement in deposit franchises, the ramp-up of digital and lending platforms and a ramp-up of its subsidiaries.
The brokerage anticipates a CAGR of 17 percent in loans and 18 percent in Earnings Per Share (EPS) for the bank over FY24-29. This growth is possible due to improvements in deposit franchises, advancements in digital and lending platforms, and ramp-up of its subsidiaries.
It has delivered a positive return of around 1.18 percent in the last six months, and nearly 22.7 percent in the last one year. So far, it has given around 6.08 percent of negative returns in 2024.
Axis Bank is the third largest private sector bank in India and is engaged in providing a wide range of financial services to customer segments covering Large and Mid-Corporates, MSME, Agriculture and Retail Businesses.
Macrotech Developers Limited
Share price of the company closed at Rs. 1,158.4 on BSE and the global brokerage firm has given a 5-year target price of Rs. 3,000, representing about 156 percent upside and CAGR returns of 21% over FY24-29 from the closing price.
With a market capitalisation of Rs. 1.15 lakh crore, the share price of the company jumped by nearly 3.5% on BSE to Rs. 1,169.15 in the trading session of March 22nd, from its previous close of Rs. 1,130.
According to Jefferies, the company is likely to experience a strong housing cycle, with pre-sales growth possibly reaching 17.5% CAGR.
The key valuation drivers include a reset in land values in its townships’ land and development into new areas, which will generate a 15-20% medium-term pre-sales CAGR.
The company has delivered a positive return of around 52.9 percent in the last six months, and nearly 181.3 percent of multibagger returns in the last one year. So far, it has given around 10.4 percent returns in 2024.
Lodha Group, also known as Macrotech Developers, is primarily engaged in the business of real estate development and is among the largest real estate developers in India with a presence in MMR (Mumbai Metropolitan Region) and Pune markets.
Written by Shivani Singh
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