Can Fin Homes downgraded to 'Hold' based on strong fundamentals and expensive valuation

Can Fin Homes, a midcap finance company specializing in housing, has recently been downgraded to a 'Hold' by MarketsMOJO. This decision is based on the company's strong long-term fundamental strength, with an average Return on Equity (ROE) of 17.17%.
In the past 9 consecutive quarters, Can Fin Homes has declared positive results, with the highest operating cash flow of Rs -2,569.60 Cr and a 21.58% growth in profits (PAT) at Rs 608.81 cr. The company's net sales have also been consistently high, with the highest at Rs 931.08 cr.

Technically, the stock is currently in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, and DOW indicating a bullish trend. Additionally, the company has a high institutional holding of 39.31%, indicating that these investors have better capabilities and resources to analyze the company's fundamentals compared to retail investors.

However, with a ROE of 17.7, Can Fin Homes has a very expensive valuation with a 2.7 Price to Book Value. The stock is currently trading at a premium compared to its average historical valuations. In the past year, while the stock has generated a return of 13.64%, its profits have only risen by 19.4%, resulting in a PEG ratio of 0.8.

Furthermore, Can Fin Homes has underperformed the market in the last year, with a return of 13.64% compared to the market (BSE 500) returns of 34.92%. This may be a cause for concern for investors considering the stock.

Overall, while Can Fin Homes has strong fundamentals and a bullish technical outlook, its expensive valuation and underperformance in the market may warrant a 'Hold' rating for now. Investors should carefully consider these factors before making any investment decisions.