Aries Agro Downgraded to 'Hold' by MarketsMOJO Due to Mixed Performance and Technical Trends

Aries Agro, a microcap company in the fertilizer industry, has recently been downgraded to a 'Hold' by MarketsMOJO on November 14, 2024. This decision was based on the company's recent financial results and its current stock performance.
In the quarter ending September 24, Aries Agro reported a 162.01% growth in net profit, indicating a very positive performance. This trend has continued for the past two consecutive quarters, with the company also achieving its highest operating cash flow of Rs 76.54 crore and highest net sales of Rs 193.66 crore in the same quarter. Additionally, its PBDIT (Profit Before Depreciation, Interest, and Taxes) also reached its highest at Rs 34.30 crore.

Despite these positive results, Aries Agro's return on equity (ROE) stands at 10.1, which is considered attractive with a price to book value of 1.3. However, the stock is currently trading at a discount compared to its historical valuations. While it has generated a return of 55.11% in the past year, its profits have only risen by 118.3%, resulting in a low PEG ratio of 0.1.

In the long term, Aries Agro has outperformed the BSE 500 index, but its ability to service its debt is weak with a poor EBIT to Interest (average) ratio of 1.81. This also reflects in its low return on equity of 6.35%, indicating low profitability per unit of shareholders' funds.

Furthermore, the company's long-term growth has been poor, with net sales growing at an annual rate of 15.25% and operating profit at 2.00% over the last five years. Technically, the stock is currently in a mildly bearish range, with the trend deteriorating from mildly bullish on November 11, 2024, resulting in a -4.39% return since then. The key technical factor, KST, has also been bearish since November 11, 2024.

Institutional investors have also decreased their stake in Aries Agro by -0.55% in the previous quarter, collectively holding only 2.53% of the company. This indicates a falling participation by these investors, who have better resources and capabilities to analyze the fundamentals of companies compared to retail investors.

Overall, while Aries Agro has shown positive results in the recent quarter, its long-term growth and ability to service debt are concerning. The stock is currently in a mildly bearish range and has seen a decrease in institutional investor participation. Therefore, MarketsMOJO has downgraded its stock call to 'Hold' for Aries Agro.