Aro Granite Industries downgraded to 'Sell' by MarketsMOJO due to weak performance

Aro Granite Industries, a microcap company in the ceramics and allied industry, has recently been downgraded to a 'Sell' by MarketsMOJO on August 5th, 2024. This decision was based on several factors, including weak long-term fundamental strength, low ability to service debt, and low profitability per unit of shareholders' funds.
Over the past five years, the company has seen a -4.41% CAGR growth in net sales, indicating a decline in its overall performance. Additionally, Aro Granite Industries has a high debt to EBITDA ratio of 7.45 times, which raises concerns about its ability to manage its debt. The company's return on equity (avg) is also low at 3.02%, further highlighting its lack of profitability.

In the latest quarter, the company's net sales have decreased by -28.40%, and its operating profit to interest ratio is at its lowest at 1.44 times. The PBDIT (profit before depreciation, interest, and taxes) is also at its lowest at Rs 5.10 crore. These results show a decline in the company's performance.

Moreover, Aro Granite Industries has underperformed the market in the last year, with a return of only 12.37%, compared to the market's (BSE 500) return of 32.89%. This further supports the 'Sell' rating given by MarketsMOJO.

On a technical level, the stock is currently in a mildly bullish range, with its MACD and KST technical factors also showing a bullish trend. However, with a ROCE (return on capital employed) of only 4.6, the stock is considered to have a very attractive valuation with a 0.7 enterprise value to capital employed. Additionally, the stock is currently trading at a discount compared to its average historical valuations.

It is worth noting that while the stock has generated a return of 12.37% in the last year, its profits have risen by 134%, resulting in a PEG ratio of 0.4. This indicates that the stock may be undervalued, but it is important to consider the other factors mentioned before making any investment decisions.

Majority shareholders of Aro Granite Industries are non-institutional investors, which may also affect the stock's performance. Overall, the downgrade to 'Sell' by MarketsMOJO highlights the company's weak performance and raises concerns about its ability to generate returns for investors.