Ceinsys Tech downgraded to 'Hold' by MarketsMOJO, despite positive short-term results
Ceinsys Tech, a smallcap IT software company, has recently been downgraded to a 'Hold' by MarketsMOJO on August 14, 2024. This decision was based on various factors such as the company's positive results in June 2024, with the highest ROCE (22.35%) and a growth of 37.20% in net sales. Additionally, the PBDIT (Profit Before Depreciation, Interest, and Taxes) for the quarter was also at its highest at Rs 13.24 crore.Technically, the stock is currently in a bullish range and has shown improvement since July 24, 2024, with a return of 23.78%. Multiple factors such as MACD, Bollinger Band, KST, and OBV also indicate a bullish trend for the stock.
With a ROE (Return on Equity) of 15, the stock is fairly valued with a price to book value of 4.8. It is also trading at a discount compared to its historical valuations. However, despite generating a return of 266.64% in the past year, the company's profits have only risen by 14%, resulting in a PEG (Price/Earnings to Growth) ratio of 3.9.
In the long term, Ceinsys Tech has outperformed the BSE 500 index and has shown market-beating performance. However, the company's ability to service debt is a concern as it has a high debt to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) ratio of 2.61 times.
Furthermore, the company's long-term growth has been poor with a growth rate of only 8.70% in net sales and 1.00% in operating profit over the last 5 years.
It is also worth noting that despite being a smallcap company, domestic mutual funds hold only 0% of the company's shares. This could signify that either they are not comfortable with the current price or they have not conducted in-depth research on the company.
In conclusion, while Ceinsys Tech has shown positive results and a bullish trend in the short term, its long-term growth and high debt to EBITDA ratio may be a cause for concern. Investors are advised to hold their positions and monitor the company's performance closely.
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