High Return Stocks Under Rs. 500: A Comprehensive Guide for Long-Term Investors

Introduction

Investors often seek affordable stocks with high return potential to build a diversified and growth-oriented portfolio. Stocks priced under Rs. 500 can be an excellent choice, especially when they demonstrate consistent performance and deliver high returns over time. This article explores Servotech Power Systems, Lloyds Engineering Works, and WS Industries—three standout stocksPriced under Rs. 500, these stocks have shown exceptional performance, generating significant returns over the last five years.

Why Invest in Stocks Under Rs. 500?

Stocks under Rs. 500 allow new and seasoned investors to build a diversified portfolio without requiring a significant upfront investment. They are ideal for retail investors, students, and first-time investors aiming to enter the stock market. Many stocks in this category belong to companies in emerging industries or niche markets, offering strong growth potential but often undervalued due to lower visibility or market awareness. Investing in high-performing, affordable stocks is a viable strategy for wealth creation. They benefit from compounding returns and can transition into mid-cap or even large-cap stocks over time.

Top High Return Stocks Under Rs. 500

1. Servotech Power Systems

Sector: Renewable Energy and EV Infrastructure
5-Year Return: 280%

Servotech Power Systems is a leading player in the renewable energy sector, focusing on solar power solutions and electric vehicle (EV) charging infrastructure. The company has reported a steady increase in revenue, driven by the growing adoption of solar energy and EV infrastructure in India. Policies supporting green energy, such as subsidies for solar panel installation, have directly benefited Servotech. With India targeting net-zero emissions by 2070, the demand for renewable energy and EV solutions is expected to grow exponentially. Servotech Power Systems’ affordable pricing and focus on a high-growth industry make it a compelling choice for long-term investors. Its strategic initiatives in EV charging station setups and international expansion add to its growth potential.

• Profit growth: 135.08% over the past three years.

• Revenue growth: 41.77% in the last three years.

• Cash Conversion Cycle: Efficient at 73.72 days.

• Promoter holding: High at 59.34%; pledging increased to 3.78% in one quarter.

• Cash flow: Negative operational cash flow of -26.81.

• Valuation: Trading at a high EV/EBITDA of 103.00.

2. Lloyds Engineering Works 

Sector: Steel and Engineering
5-Year Return: 195%

Lloyds Engineering Works operates in the steel sector, providing specialized engineering solutions for heavy industries. As infrastructure projects increase worldwide, the demand for steel products has surged, benefiting Lloyds Engineering. The company invests heavily in R&D to produce high-strength, lightweight steel products, appealing to automotive and construction industries. Lloyds Engineering has optimized its production processes, improving profit margins and enhancing shareholder value. The company’s innovative approach, coupled with the global infrastructure boom, positions it well for sustained growth. Its attractive pricing under Rs. 500 makes it an excellent option for investors seeking exposure to the industrial sector.

• The company has shown a 441.19% profit growth over the past 3 years.

• The company has experienced 107.32% revenue growth in the last 3 years.

• It has maintained a healthy ROCE of 21.95% over the past 3 years.

• The company has a strong interest coverage ratio of 25.04.

• The company operates with an efficient Cash Conversion Cycle of 84.44 days.

• It has a healthy current ratio of 3.21, indicating good liquidity.

• Promoter holding is high at 57.25%.

• The company has negative cash flow of -44.98.

• It is trading at a high PE ratio of 81.74.

• The company’s EV/EBITDA ratio is elevated at 60.06.

3. WS Industries 

Sector: Electrical Equipment and Power Infrastructure
5-Year Return: 310%

WS Industries specializes in electrical equipment manufacturing, with a strong presence in power transmission and distribution projects. The company has secured major contracts for power infrastructure development in emerging economies, including Africa and Southeast Asia. WS Industries employs advanced manufacturing technologies to maintain product quality and reduce costs. With rapid urbanization in India and other developing nations, the demand for power infrastructure continues to rise. WS Industries’ consistent performance, robust order book, and focus on innovation make it a standout stock under Rs. 500. Its leadership in the power infrastructure sector aligns with global trends favoring electrification and modernization.

• The company has achieved 199.35% profit growth over the past 3 years.

• It has maintained a healthy ROE of 37.34% over the past 3 years.

• The company has a strong ROCE of 27.61% during the same period.

• It has a solid interest coverage ratio of 26.34.

• The Cash Conversion Cycle is efficient at 27.21 days.

• Promoter holding is high at 60.38%.

• The company has a low tax rate of -6.95.

• The EBITDA margin has been low at -68.70% over the past 5 years.

Factors to Consider Before Investing

Examine key financial metrics like revenue growth, profit margins, debt levels, and return on equity (ROE). A company with a healthy balance sheet and strong fundamentals is more likely to sustain its growth. Understand the broader industry context. For example, the renewable energy and power infrastructure sectors are poised for long-term growth due to policy support and rising demand. Assess the performance history of the company’s leadership team to understand their ability to drive growth and achieve strategic objectives. Strong leadership is critical for executing growth strategies effectively. Metrics like price-to-earnings (P/E) ratio and price-to-book (P/B) ratio can help determine whether a stock is undervalued or overvalued compared to its peers.

Risks to Watch Out For

Stocks priced below Rs. 500 often experience higher price fluctuations compared to stable blue-chip stocks, making them more sensitive to market volatility. Sudden market fluctuations may impact their prices significantly. Industries like steel and renewable energy are often influenced by macroeconomic factors, including commodity price changes and government policies. Low-priced stocks may have lower trading volumes, leading to liquidity issues when buying or selling in large quantities.

How to Invest in These Stocks

Platforms like Enrich Money and the ORCA app are excellent resources for analyzing stock performance, historical data, and valuation metricsDiversify your portfolio by investing in a variety of stocks and sectors to reduce risk and prevent dependence on any single market segment. A well-diversified portfolio reduces potential risks and promotes more consistent returns over time. Stocks under Rs. 500 are ideal for long-term investments. Be prepared to hold your investments for at least 5-10 years to realize their full growth potential.

Conclusion

Stocks under Rs. 500 offer a unique blend of affordability and potential for high returns, making them an attractive option for long-term investors. Companies like Servotech Power Systems, Lloyds Engineering Works, and WS Industries exemplify how low-priced stocks can deliver stellar performance. By carefully analyzing financial metrics, industry trends, and company fundamentals, you can make informed investment decisions.Ensure your stock selections are in sync with your investment objectives and ability to manage risk. It's wise to seek guidance from a financial advisor before making major investment choices.

Frequently Asked Questions

1. What are high-return stocks under Rs. 500?
   Stocks priced below Rs. 500 that have shown strong financial performance and delivered substantial returns over time.

2. Why should I invest in these stocks?
   They offer affordability and growth potential, making them suitable for diversifying portfolios and long-term wealth creation.

3. Are these stocks risky?
   Yes, they can be more volatile than blue-chip stocks due to market and industry-specific factors. Always assess the risks before investing.

4. How can I invest in these stocks?
   You can invest using platforms like Enrich Money or the ORCA app, which offer tools for stock analysis and portfolio management.

5. What factors should I consider before buying?
   Review financial metrics like P/E ratio, industry trends, company management, and market liquidity for informed decision-making.

 

Disclaimer: This blog is dedicated exclusively for educational purposes. Please note that the securities and investments mentioned here are provided for informative purposes only and should not be construed as recommendations. Kindly ensure thorough research prior to making any investment decisions. Participation in the securities market carries inherent risks, and it's important to carefully review all associated documents before committing to investments. Please be aware that the attainment of investment objectives is not guaranteed. It's important to note that the past performance of securities and instruments does not reliably predict future performance.