Aarti Surfactants Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals and High Debt

Aarti Surfactants, a microcap company in the chemicals industry, has recently been downgraded to a 'Sell' by MarketsMOJO on July 1, 2024. This decision was based on weak long-term fundamental strength, with a -19.43% CAGR growth in operating profits over the last 5 years. Additionally, the company has a high debt to EBITDA ratio of 3.36 times, indicating a low ability to service debt.
In the most recent quarter, Aarti Surfactants reported flat results with a decrease in PAT(Q) at Rs 4.65 crore, falling by -12.9%, and the lowest EPS(Q) at Rs 5.49. Despite its size, the company has not gained much interest from domestic mutual funds, with only 0% of the company being held by them. This could suggest that either they are not comfortable with the current price or the business itself.

Furthermore, the stock has underperformed the market in the last year, with a return of only 10.00% compared to the market's (BSE 500) return of 37.64%. However, there are some bullish factors for the stock, such as being in a mildly bullish range and having multiple technical indicators, including MACD, Bollinger Band, and KST, showing positive signs.

From a valuation perspective, Aarti Surfactants seems attractive with a ROCE of 13.6 and an enterprise value to capital employed ratio of 2.3. The stock is also trading at a discount compared to its average historical valuations. In the past year, while the stock has generated a return of 10.00%, its profits have increased by 67.9%, resulting in a PEG ratio of 0.5.

In conclusion, while Aarti Surfactants may have some bullish indicators, the overall fundamental strength and debt situation of the company have led to its downgrade to a 'Sell' by MarketsMOJO. Investors should carefully consider these factors before making any decisions regarding this microcap company in the chemicals industry.