Ace Software Exports downgraded to 'Sell' by MarketsMOJO due to weak fundamentals

Ace Software Exports, a microcap IT software company, has recently been downgraded to a 'Sell' by MarketsMOJO on June 18, 2024. This downgrade is based on several factors that indicate a weak long-term fundamental strength for the company.
One of the main reasons for the 'Sell' rating is the company's average Return on Equity (ROE) of 0.45%, which is considered weak. Additionally, the company has shown poor long-term growth with Net Sales growing at an annual rate of 24.31% and Operating profit at 16.23% over the last 5 years. Furthermore, the company's ability to service its debt is also weak, with a poor EBIT to Interest (avg) ratio of -1.67.

Another concerning factor is the negative operating profits of the company, making it a risky investment. The stock is also trading at a higher risk compared to its average historical valuations. However, in the past year, the stock has generated a return of 1231.20%, while its profits have only risen by 480%. This has resulted in a PEG ratio of 0, indicating that the stock may be overvalued.

On a positive note, Ace Software Exports has shown a growth in Net Sales of 749.28%, and the company has declared positive results for the last 2 consecutive quarters. The company's ROCE(HY) is also at its highest at 18.48%, and its PAT(Q) has grown at 71.6%. Additionally, the company has a strong cash position, with CASH AND CASH EQUIVALENTS(HY) at its highest at Rs 5.07 cr.

From a technical standpoint, the stock is currently in a Mildly Bullish range, with the technical trend improving since May 8, 2024, and generating 60.31% returns since then. Multiple factors, such as MACD, Bollinger Band, KST, and DOW, also indicate a bullish trend for the stock.

Moreover, there has been a rise in promoter confidence, with promoters increasing their stake in the company by 6.85% over the previous quarter and currently holding 74.96% of the company. This is a positive sign, indicating high confidence in the future of the business.

In terms of performance, Ace Software Exports has outperformed BSE 500 in the last 3 years, 1 year, and 3 months, making it a market-beating stock in both the long-term and near-term. However, considering the recent downgrade and the weak fundamental strength of the company, investors may want to approach this stock with caution.