Active Clothing Co Receives 'Sell' Rating from MarketsMOJO Due to Weak Fundamental Strength

Active Clothing Co, a microcap company in the textile industry, has recently received a 'Sell' rating from MarketsMOJO on February 5, 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 low ability to service debt, with a high Debt to EBITDA ratio of 4.89 times. This means that the company may struggle to pay off its debts in the future. Additionally, Active Clothing Co has only seen a -0.40% CAGR growth in Operating Profits over the last 5 years, indicating a lack of growth and profitability.

Furthermore, the company's Return on Equity (avg) is only 2.18%, which is considered low and shows a low profitability per unit of shareholders' funds. With a ROCE of 6.9, the stock is also considered to have a very expensive valuation with a 1.6 Enterprise value to Capital Employed.

In terms of stock performance, Active Clothing Co has seen a significant increase of 108.54% in the past year. However, its profits have only risen by 174%, resulting in a PEG ratio of 0.1. This suggests that the stock may be overvalued compared to its historical valuations.

On a positive note, the company has declared positive results for the last 3 consecutive quarters, with a growth in Net Profit of 64.55%. It also has the highest OPERATING PROFIT TO INTEREST(Q) and NET SALES(Q) among its peers, at 3.27 times and Rs 76.86 cr respectively. Additionally, the stock is technically in a Mildly Bullish range, with its MACD and KST technical factors also showing a Bullish trend.

Active Clothing Co's majority shareholders are its promoters, and the company has consistently generated returns over the last 3 years. It has also outperformed BSE 500 in each of the last 3 annual periods, further highlighting its potential for growth.

In conclusion, while Active Clothing Co may have seen a significant increase in stock price in the past year, its fundamental strength and valuation suggest a 'Sell' rating. Investors should carefully consider these factors before making any investment decisions.