Aro Granite Industries Downgraded to 'Sell' by MarketsMOJO Due to Weak Performance and High Debt

Aro Granite Industries, a microcap company in the ceramics/marble/granite/sanitaryware industry, has recently been downgraded to a 'Sell' by MarketsMOJO on September 30, 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.
One of the main reasons for the downgrade is the company's weak net sales growth, which has seen a -4.41% CAGR over the last 5 years. Additionally, Aro Granite Industries has a high debt to EBITDA ratio of 7.45 times, indicating a low ability to service debt. The company's return on equity (avg) is also low at 3.02%, further highlighting its lack of profitability.

In the short term, the company's performance has been below par, with a -28.40% growth in net sales in the last half-year and the lowest operating profit to interest ratio of 1.44 times. Its PBDIT (profit before depreciation, interest, and taxes) is also at its lowest at Rs 5.10 crore.

Furthermore, Aro Granite Industries has underperformed the BSE 500 index in the last 3 years, 1 year, and 3 months, with a return of -2.75% in the last year alone. However, the stock is currently in a mildly bullish range, with multiple factors such as MACD, KST, and OBV indicating a bullish trend.

On the positive side, the company has a very attractive valuation with a ROCE (return on capital employed) of 4.6 and an enterprise value to capital employed ratio of 0.7. It is also trading at a discount compared to its average historical valuations. In the past year, while the stock has generated a return of -2.75%, its profits have risen by 134%, resulting in a PEG (price/earnings to growth) ratio of 0.4.

It is worth noting that the majority of shareholders in Aro Granite Industries are non-institutional investors. Overall, the stock has been downgraded to 'Sell' due to its weak long-term and short-term performance, high debt, and low profitability. Investors should carefully consider these factors before making any investment decisions.