Under the Radar: The Early Blueprint of a Multi-Bagger

One of the great myths of investing is that multi-baggers are discovered by finding the fastest-growing companies with the most exciting stories. That is not how it actually works. Growth is what we talk about after the returns have already been made. The real work happens much earlier, when a business is quietly compounding cash while the market is busy looking somewhere else.

Recent academic work confirms what disciplined value investors have known for decades. Growth, in and of itself, does a remarkably poor job of predicting which stocks will go on to become true multi-baggers. Revenue growth, earnings growth, even multi-year growth rates simply do not hold up as reliable predictors once valuation, profitability, cash generation, and capital discipline are taken into account.

That finding should not surprise us. Growth attracts attention, and attention attracts capital. Once growth is obvious, it is usually priced. Multi-baggers, by contrast, are born in mispricing.

That is why Under the Radar exists.

The place to look for future multi-baggers is not among the most popular stocks on financial television. It is among businesses that already work economically but are valued as if they do not. These are companies where the market assumes mediocrity, cyclicality, or stagnation, even though the underlying business is quietly throwing off cash.

The starting point is always the enterprise, not the stock. Price-to-earnings ratios and revenue multiples tell you very little about what a business is actually worth. Enterprise value forces us to confront the full capital structure and the true cost of owning the business. When you look at future multi-baggers this way, a consistent pattern emerges.

They almost always begin life trading at unexciting enterprise multiples. Mid–single-digit to low–double-digit EV-to-EBITDA ratios are common. Sometimes lower. These are not valuations that imply greatness. They imply skepticism. That skepticism is the opportunity.

Just as important, these businesses are already generating real free cash flow. Not adjusted cash flow. Not promised future cash flow. Actual cash that shows up year after year. This turns out to be one of the strongest predictors of future multi-bagger outcomes. Cash provides optionality. It allows companies to invest when others cannot survive downturns, buy competitors, reduce debt, or simply compound quietly while expectations remain low.

Notice what is missing here. We are not screening for rapid revenue growth. We are not demanding explosive earnings growth. Growth is allowed, but it is not required. In fact, visible growth often works against investors because it brings higher expectations, higher valuations, and far less room for multiple expansion.

Profitability matters far more than growth. Businesses with solid margins and repeatable economics have the ability to self-fund. They do not need capital markets to cooperate. That independence is critical over long time horizons.

Capital discipline matters even more. One of the clearest red flags in the research is aggressive investment that outpaces operating performance. When asset growth consistently exceeds EBITDA growth, future returns suffer. Multi-baggers are not built by empire builders. They are built by management teams that treat capital like owners, not promoters.

Balance sheets matter for the same reason. Most future multi-baggers begin their journey with conservative leverage. Net debt is manageable. Liquidity is adequate. These companies are positioned to survive periods of stress that wipe out weaker competitors. Survival is underrated. It is also non-negotiable.

Finally, timing matters, but not the way most investors think. Multi-baggers are rarely bought at new highs. In fact, stocks trading near their 52-week highs tend to deliver lower forward returns. The best opportunities usually appear when prices are depressed, range-bound, or declining, even as the business itself remains intact.

That is uncomfortable. It is supposed to be.

Under-the-radar opportunities feel wrong at the moment of purchase. They do not come with cheering crowds. They come with doubt, boredom, and often mild embarrassment. That is exactly why they work.

When you put all of this together, the profile of a future multi-bagger becomes much clearer. It is a smaller company. It is already profitable. It generates real free cash flow. It trades at an enterprise valuation that assumes nothing special will happen. It invests conservatively. It carries a resilient balance sheet. Its stock price is ignored or temporarily disliked.

This is not a screen for excitement. It is a screen for mispricing.

What follows are five companies that pass the multi-bagger screen we recently laid out. None of them are obvious. None of them are priced for perfection. All of them generate real cash, trade at enterprise valuations that imply skepticism, and operate in businesses where expectations are low enough that re-rating, not heroic growth, can do the heavy lifting.

This is exactly where future multi-baggers tend to start.

V2X, Inc. (NYSE:VVX)
V2X is a government services contractor providing mission-critical support across defense and civilian agencies. The company operates at the unglamorous but essential intersection of logistics, sustainment, training, base operations, and increasingly, technology-enabled mission solutions such as data engineering, intelligence support, and cyber-related services. These are not discretionary programs. They are "keep the lights on" functions for the U.S. government and allied customers.

From a screening standpoint, VVX fits because it is priced like a low-quality contractor while behaving more like a stable, cash-generating enterprise. At the enterprise level, the stock trades at a valuation that implies limited margin expansion and little strategic upside, even as the company produces meaningful free cash flow and works to improve mix toward higher-value services. That combination of skepticism and cash generation is exactly what the model favors.

The multi-bagger pathway here is not explosive growth. It is steady execution, modest margin improvement, disciplined capital allocation, and a gradual shift in how the market perceives the quality and durability of the revenue base. Government services businesses rarely get love, but when they do, multiple expansion can be powerful.

The key risks are execution and leverage. Contract economics matter enormously, and a few problem programs can swing sentiment quickly. VVX is not a story stock. It is a grind-it-out compounder candidate, and it will only work if management continues to act like owners rather than promoters.

Stride, Inc. (NYSE:LRN)
Stride operates in technology-enabled education, with roots in K-12 online learning and an expanding footprint in career learning and adult education. The company provides curriculum, platforms, and services that support individualized learning across a range of educational settings.

LRN is a textbook example of why growth screens fail. Many investors look at Stride and immediately slot it into a political or regulatory narrative and stop there. The multi-bagger screen forces a different view. At the enterprise level, Stride trades at a valuation that remains modest relative to the cash it generates. Free cash flow is real, recurring, and substantial, yet the market continues to price the business as fragile or controversial.

That disconnect is the opportunity. You do not need aggressive enrollment growth or heroic assumptions. You need the business to keep working and for the market to eventually concede that cash flow is not an illusion. If that happens, the re-rating alone can drive outsized returns.

The risks are obvious and real. Education is politically sensitive. Regulatory changes, enrollment volatility, or quality issues can create sharp drawdowns. But those drawdowns are also what create the entry points. Multi-baggers are rarely bought when everyone feels comfortable.

DXC Technology (NYSE:DXC)
DXC is a global IT services company providing consulting, engineering, and managed infrastructure services to large enterprises. It is widely viewed as a legacy operator in an industry obsessed with the next big thing. That reputation is exactly why DXC screens so well.

At the enterprise level, DXC is priced as if decline is inevitable. Yet the company continues to generate large amounts of free cash flow. The valuation implies little confidence in management's ability to stabilize the business, let alone improve it. That is a very low bar.

The multi-bagger logic here is straightforward. DXC does not need to become a best-in-class growth story. It needs to stop getting worse. If revenue erosion slows, margins stabilize, and free cash flow continues to be directed toward debt reduction and buybacks, the equity can compound dramatically from a depressed base.

This is not a low-risk situation. Legacy IT services are competitive, and history is littered with failed turnaround stories. The screen does not eliminate that risk. It simply highlights that expectations are already washed out, which is a necessary condition for extreme upside.

Leggett & Platt, Inc. (NYSE:LEG)
Leggett & Platt is one of the least fashionable companies in the market. It manufactures engineered components used in bedding, furniture, flooring, automotive seating, and a range of industrial applications. This is a 140-year-old business built around springs, steel wire, and components most investors never think about.

That is precisely why LEG belongs in this discussion.

At the enterprise level, Leggett & Platt trades at a valuation that reflects cyclical pessimism and skepticism about long-term growth. Yet the company has historically generated strong free cash flow across cycles and operates in niches where scale, relationships, and manufacturing know-how matter more than headlines.

The multi-bagger path here would not be driven by excitement. It would be driven by normalization. As demand stabilizes in housing-related end markets and management continues to rationalize operations and allocate capital conservatively, cash flow can recover while the multiple expands from depressed levels.

LEG's long dividend history often dominates the conversation, but for our purposes the more important question is enterprise value versus normalized cash generation. If the market is overly discounting cyclical weakness, that creates exactly the kind of under-the-radar setup the screen is designed to find.

The risk is that secular decline overwhelms cyclical recovery. This is not a "set it and forget it" situation. It requires monitoring of margins, capex discipline, and balance-sheet strength. But when boring businesses are written off too aggressively, the upside can be substantial.

The Eastern Company (NASDAQ:EML)
The Eastern Company is a small industrial manufacturer focused on engineered solutions for industrial markets. These are niche products, often designed into customer systems, where reliability and customization matter more than price competition. This is not a roll-the-dice growth story. It is a quiet industrial compounder candidate.

EML fits the screen because it trades at an enterprise valuation that implies modest prospects while generating real cash and maintaining a relatively conservative balance sheet. For companies of this size, survivability matters enormously. Eastern has that.

The multi-bagger pathway for EML would come from steady operational improvement, selective bolt-on acquisitions done at the right price, and disciplined capital returns when the market is undervaluing the enterprise. This is exactly how small industrial multi-baggers are built over time.

The risks are the usual ones: cyclical end markets, execution missteps, and the temptation to overinvest at the wrong point in the cycle. But again, the valuation provides a margin of safety that more celebrated industrial names simply do not offer.

Closing thought
None of these companies are obvious winners. That is the point. Multi-baggers do not start as consensus ideas. They start as cash-generating businesses priced as if nothing good will happen.