Amba Enterprises downgraded to 'Hold' by MarketsMOJO due to high valuation and strong financials

Amba Enterprises, a microcap engineering company, has recently been downgraded to a 'Hold' by MarketsMOJO on August 6, 2024. This decision was based on various factors, including the company's high management efficiency with a ROCE of 19.53% and its strong ability to service debt with a low Debt to EBITDA ratio of 0.41 times.
In addition, Amba Enterprises has shown healthy long-term growth with its Net Sales growing at an annual rate of 26.00% and Operating profit at 36.25%. The company has also declared positive results for the last three consecutive quarters, with NET SALES(HY) at Rs 138.69 crore growing at 20.88% and PAT(9M) higher at Rs 4.98 crore.

Technically, the stock is currently in a mildly bullish range, with multiple factors such as MACD, KST, and OBV indicating a bullish trend. The majority shareholders of the company are non-institutional investors.

Amba Enterprises has also shown market-beating performance in both the long-term and near-term, outperforming BSE 500 in the last 3 years, 1 year, and 3 months. However, with a ROCE of 17.9, the stock is currently trading at a very expensive valuation with a 6.1 Enterprise value to Capital Employed.

Investors should also note that the stock is currently trading at a premium compared to its average historical valuations. While the stock has generated a return of 136.67% in the past year, its profits have only risen by 30.2%, resulting in a PEG ratio of 1.5. Based on these factors, MarketsMOJO has downgraded the stock to a 'Hold' recommendation.