Arvind Fashions downgraded to 'Hold' by MarketsMOJO, despite strong growth and market-beating performance

Arvind Fashions, a midcap retail company, has recently been downgraded to a 'Hold' by MarketsMOJO on October 28, 2024. This decision was based on various factors, including the company's healthy long-term growth with an annual operating profit growth rate of 39.73%. Additionally, Arvind Fashions has declared positive results for the last four consecutive quarters, with its highest operating cash flow at Rs 434.18 Cr and higher PAT at Rs 57.47 Cr for the last nine months. The company also has a low debt-to-equity ratio of 1.14 times, indicating a strong financial position.
Technically, the stock is currently in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, KST, and OBV being bullish. With a ROCE of 14.3, the stock is also considered to have a very attractive valuation, with an enterprise value to capital employed ratio of 4.2. Furthermore, the stock is currently trading at a discount compared to its average historical valuations. Over the past year, the stock has generated a return of 71.95%, while its profits have risen by 207.9%. The PEG ratio of the company is also at a low 0.4.

Arvind Fashions also has a high institutional holding of 31.45%, indicating that these investors have better capabilities and resources to analyze the company's fundamentals compared to retail investors. In fact, their stake has increased by 3.93% over the previous quarter. The company has also shown market-beating performance in the long term, with a return of 71.95% in the last year and outperforming BSE 500 in the last three years, one year, and three months.

However, one concern for the company is its ability to service debt, as it has a high debt-to-EBITDA ratio of 4.58 times. This could potentially impact the company's financial stability in the long run. Additionally, Arvind Fashions has a low return on equity (average) of 2.22%, indicating low profitability per unit of shareholders' funds.

Overall, while Arvind Fashions has shown strong growth and market-beating performance, the high debt-to-EBITDA ratio and low return on equity are factors to consider before making any investment decisions. MarketsMOJO's downgrade to 'Hold' suggests a neutral stance on the stock, and investors should carefully evaluate all aspects before making any decisions.