Can Fin Homes downgraded to 'Hold' by MarketsMOJO due to expensive valuation and underperformance

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%.
The company has also declared positive results for the last 9 consecutive quarters, with the highest operating cash flow of Rs -2,569.60 Cr and a 21.58% growth in profits (PAT) in the last 9 months. Its net sales have also reached a high of Rs 931.08 Cr.

Technically, the stock is in a mildly bullish range with multiple factors such as MACD, Bollinger Band, and KST 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, the stock is currently trading at a very expensive valuation with a price to book value of 2.7. This is a premium compared to its average historical valuations. In the past year, while the stock has generated a return of 15.71%, 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 15.71% compared to the market (BSE 500) return of 38.49%. This may be a cause for concern for investors considering the stock.

In conclusion, 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.