The 3-Legged Test Very Few Smallcaps Pass
Most multibagger hunts begin with the share price. This one begins with the balance sheet. Take out every company that carries debt, then keep only those earning a high return on the capital they use, and the list shrinks fast. Add a third filter, that the stock has already multiplied investor money several times over, and few names survive. I ran such a test and only two stocks passed the test. Both sit in very different corners of the market.
One of these stocks is a small healthcare services firm whose share price has climbed by about 5,945% in five years, is debt free and clocks a return on capital employed (ROCE) of 87% which is highest in the sector.
The question is, has the engine run out of steam, or is this just the beginning of the next multibagger in the making? Let’s dive in to try and find out.
#1 One Global Service Provider: The Penny Stock That Made Millions
Incorporated in 1992, One Global Service Provider is in the business of healthcare services. It works in life sciences and healthcare solutions across the globe, with stated expertise in mass screening, diagnostics and related sciences used by hospitals, healthcare professionals and government bodies.
With a market cap of Rs 1,064 cr, the company has also moved into software and IT consultancy, and runs an online platform selling healthcare products, from medical devices to consumables.
For most of its listed life, none of this showed up in the numbers. Sales were tiny until a few years ago. Then the top line caught speed. Let us take a look at the financials to get a better sense.
Evaluating the 104% CAGR Profit Scaling Against Low-Base Realities
The growth here is real, but it is young and it is steep.
| Financial Year | FY21 | FY22 | FY23 | FY24 | FY25 | FY26 | 5Yr CAGR |
| Sales (Rs Cr) | 4 | 6 | 18 | 63 | 147 | 498 | 162% |
| EBITDA (Rs Cr) | 2 | 1 | 2 | 10 | 25 | 93 | 116% |
| Net profit (Rs Cr) | 2 | 1 | 1 | 7 | 18 | 70 | 104% |
Sales logged an upward growth and went from Rs 4 cr in FY21 to Rs 498 cr in FY26. Net profit followed the same path, from about Rs 2 cr in FY21 to Rs 70 cr in FY26, logging a compound growth of 104% in 5 years. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) also logged a compounded growth of a big 116% in last 5 years.
The True Cost of Capital Efficiency: Breaking Down an 87% ROCE
On capital efficiency the story gets interesting. One Global earns a return on capital employed (ROCE) of about 87% while the industry median is 22%. In plain words, for every Rs 100 of capital the company puts to work, it earns roughly Rs 87 of operating profit on it while its peers manage just Rs 22.
The company has a return on equity (ROE) of near 65%. Both ROCE and ROE figures sit much above what a typical healthcare services firm manages. The company is also almost debt free, with borrowings close to nil.
This gives the company freedom from any hefty interest payment, giving them the liberty to either invest the profits back into the business for growth, or give back to stake holders by means of dividends. However, though the company is reporting repeated profits, it is not paying out any dividend.
The Mechanics of a 60x Return – Is the Valuation Justified?
The share price of One Global was about Rs 9 in June 2021 and as of closing on 5th June 2026 it was Rs 544. That is a growth of about 5,945% in just 5 years.
One Global Service Provider Long Term Price Chart
Rs 1 lac invested in the stock 5 years ago would have been about Rs 60 lacs today.
Coming to the valuation, the stock trades at a PE of 15x, much below the current industry median of 47x. The 10-Year median PE for the company is 16x while the industry median for the same period is 26x.
The Risks of High Debtor Cycles and Equity Surges
The shareholding has been turned upside down in a year. Promoter holding had fallen to about 15% in March 2025. By March 2026 it stood at 68.4 per cent, lifted by a merger that brought in new promoter shares. Over the same time, FII (Foreign Institutional Investors) holding fell from about 15% to 5.4%, and public holding dropped from 70% to 26%. A register that moves this much in a year deserves a careful read before anyone calls the chart a clean compounding story.
There is more to watch. The stock sits under additional surveillance, which can cap trading. It also waits a long time to get paid, with debtor days around 159, so customers take more than five months to settle bills. And at nearly 8 times book value, the shares are not cheap on assets even if they look cheap on earnings. The growth is real. The base is small, fresh and untested.
Apart from One Global, there was one more company that passed the test.
#2 ADC India Communications: Cabling India’s Networks with Multinational Backing
Incorporated in 1988 as Krone Communications, ADC India Communications makes the physical plumbing of data networks, copper and fibre connectivity, and structured cabling for enterprises and telecom service providers.
With a market cap of Rs 1,125 cr, the company is the Indian arm of TE Connectivity, the global connectivity giant, which holds about 72 per cent of the shares.
This is unglamorous but essential hardware. Every office network, data centre and telecom rollout needs the cabling that firms like ADC supply. The parent matters too, since it brings technology and a global product range a standalone smallcap could not build alone.
Unpacking FY26 Margin Contraction From 16% to 10%
For years ADC grew in a slow, dependable line.
| Financial Year | FY21 | FY22 | FY23 | FY24 | FY25 | FY26 | 5Yr CAGR |
| Sales (Rs Cr) | 60 | 121 | 143 | 179 | 187 | 200 | 27% |
| EBITDA (Rs Cr) | 5 | 11 | 10 | 26 | 29 | 21 | 33% |
| Net profit (Rs Cr) | 4 | 8 | 8 | 21 | 24 | 19 | 39% |
Sales rose from Rs 60 cr in FY21 to Rs 200 cr in FY26. operating profit went from Rs 5 cr to Rs 21 cr and Net Profits jumped from Rs 4 cr to Rs 19 cr in the same period.
However, FY26 saw a dip in numbers as compared to the numbers for FY25, breaking the upward streak the company had logged in the previous years. Sales grew only 7 per cent, while operating profit fell from Rs 29 cr to Rs 21 cr and net profit slipped from Rs 24 cr to Rs 19 cr. The operating margin dropped from 16 per cent to 10 per cent. So, earnings actually shrank in the same year the share price kept climbing. That is a gap worth keeping in mind.
The quality markers, though, are strong. ADC has a current ROCE of 32% while the industry median is just 8%. So, for every Rs 100 of capital it uses, it makes roughly Rs 32 of operating profit, well ahead of the typical industry maker. It carries no debt, and it shares the cash, with a dividend payout running above 60% and a fresh dividend of Rs 25 a share declared for FY26.
770% Returns v/s an Active Profit Contraction
The share price of ADC India Communications Ltd was about Rs 280 in June 2021 and as of closing on 5th June 2026 it was Rs 2,446, which is a jump of over 770% in 5 years.
ADC India Communications Long Term Price Chart
Rs 1 lac put in five years ago would be worth roughly Rs 8.7 lac now. In the last year alone, the stock has more than doubled.
Regarding valuation, ADC trades at a PE of 60x which is same as the industry median. The 10-year median PE of the company is 26x while the industry median for the same period is 23x.
Two more points worth noting are that some of ADC’s profit comes from other income, about Rs 4 cr in FY26, so the headline is a touch softer than it looks. The free float is thin, with the parent holding 72 per cent, which can make the price swing hard both ways.
Why Clean Balance Sheets Alone Do Not Guarantee the Right Entry Price
While both the stocks were the only output for a tight 3-legged screen of zero debt, high return and a high return on capital, they still end up in two very different places. One Global is a young, big earner that looks cheap on earnings, yet sits on a tiny base, a reshuffled register and a trading curb. ADC is a decades old cash generating franchise with a bluechip parent and a healthy dividend payout, yet trades at nearly 60 times earnings even as profit fell.
The lesson is an old one. A clean balance sheet and a high return on capital tell you the business is good. They do not tell you the price is right. With One Global, the question is whether the recent earnings are durable. With ADC, the question is whether quality alone can justify a multiple that already assumes years of flawless growth.
Will these two smallcap companies be the next multibaggers or bluechips is something only time can tell. The only way to be in the know is to add both to a watchlist and watch closely, rather than chase.
Note: We have relied on data from http://www.Screener.in and http://www.trendlyne.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, he was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.