Cantabil Retail India Downgraded to 'Sell'

Cantabil Retail India, a smallcap company in the textile industry, has recently been downgraded to a 'Sell' by MarketsMOJO on December 19, 2023. This decision was based on the company's negative results in September 2023, after 9 consecutive quarters of positive performance. The company's operating profit to interest ratio was at its lowest at 4.08 times, while its PAT (profit after tax) saw a decline of -19.2%. Additionally, the debtors turnover ratio for the half year was also at its lowest at 40.28 times.
One of the main reasons for the downgrade is the expensive valuation of the company, with a ROCE (return on capital employed) of 19.1 and an enterprise value to capital employed ratio of 4.2. This is further supported by the fact that the stock is currently trading at a discount compared to its average historical valuations. In the past year, while the stock has generated a negative return of -4.21%, its profits have increased by 15.2%, resulting in a PEG (price/earnings to growth) ratio of 2.1.

Another concerning factor is the low stake of domestic mutual funds in the company, at only 0%. This could indicate that they are either not comfortable with the current price or the business itself. Furthermore, Cantabil Retail India has underperformed the market (BSE 500) in the last year, with negative returns of -4.21% compared to the market's positive return of 20.81%.

However, there are some positive aspects to consider. The company has shown healthy long-term growth, with an annual growth rate of 57.33% in operating profit. Additionally, the stock is currently in a mildly bullish range, with multiple technical indicators such as MACD, Bollinger Band, KST, and OBV pointing towards a bullish trend.

In conclusion, while Cantabil Retail India may have potential for long-term growth, the current financial performance and market trends suggest a 'Sell' rating. Investors should carefully consider all factors before making any investment decisions.