Bata India Receives 'Sell' Rating Due to Poor Long-Term Growth and Underperformance

Bata India, a leading consumer durables company in the midcap segment, has recently received a 'Sell' rating from MarketsMOJO. This downgrade is based on the company's poor long-term growth, with an annual operating profit growth rate of -3.71% over the last 5 years.
In addition, the company's results for the quarter ending June 2024 have been flat, with a decrease of -18.8% in profit before tax (PBT) less operating income (OI). Non-operating income (NOI) also accounts for a significant portion of the PBT at 69.17%. This below-par performance has been reflected in the stock's returns, with a -14.61% return in the last year and underperformance compared to BSE 500 in the last 3 years, 1 year, and 3 months.

However, Bata India does have a strong ability to service debt, with a low debt to EBITDA ratio of 0.55 times. The technical trend for the stock is currently sideways, indicating no clear price momentum. The stock's technical trend has also deteriorated since September 2024, generating a -0.63% return since then.

On the positive side, Bata India has a fair valuation with a ROCE of 18 and an enterprise value to capital employed ratio of 7.8. The stock is currently trading at a discount compared to its average historical valuations. Additionally, while the stock has generated a negative return in the past year, its profits have increased by 15.9%, resulting in a PEG ratio of 3.2.

It is worth noting that Bata India has a high institutional holding of 35.14%, indicating that these investors have better resources and capabilities to analyze the company's fundamentals compared to retail investors. Overall, while Bata India may have some positive aspects, the recent downgrade to 'Sell' by MarketsMOJO highlights the company's poor long-term growth and below-par performance.