CEAT downgraded to 'Sell' by MarketsMOJO after negative results. Technical trend worsens, but ROCE remains attractive.

CEAT, a midcap company in the Tyres & Allied industry, has recently been downgraded to a 'Sell' by MarketsMOJO. This downgrade comes after the company reported negative results for the quarter ending September 2024. The company's PBT (Profit Before Tax) less OI (Operating Income) has fallen by 26.8%, while its PAT (Profit After Tax) has decreased by 28.9%. Additionally, the company's operating profit to interest ratio has reached its lowest point at 5.45 times.
The technical trend for CEAT is currently sideways, indicating no clear price momentum. This trend has worsened since November 4, 2024, when it was mildly bullish, resulting in a -2.44% return since then. However, the company's ROCE (Return on Capital Employed) is at an attractive 16.4%, with an enterprise value to capital employed ratio of 2.1. This suggests that the stock is trading at a discount compared to its average historical valuations.

Despite generating a return of 28.66% over the past year, CEAT's profits have only increased by 13.5%. This results in a PEG (Price/Earnings to Growth) ratio of 1.4, indicating that the stock may be overvalued. Furthermore, the company has a high institutional holding of 36.39%, which suggests that these investors have better capabilities and resources to analyze the company's fundamentals compared to retail investors. Their stake in the company has also increased by 0.53% over the previous quarter.

In conclusion, with negative results and a deteriorating technical trend, MarketsMOJO's downgrade of CEAT to 'Sell' may be a cause for concern for investors. However, the company's attractive ROCE and discounted stock price may still make it an appealing option for some.