Centum Electronics Downgraded to 'Hold' by MarketsMOJO Due to Mixed Results and Technical Trends

Centum Electronics, a smallcap company in the electronics components industry, has recently been downgraded to a 'Hold' by MarketsMOJO on February 8, 2024. This decision was based on the company's latest financial results and technical trends.
In December 2023, Centum Electronics reported a growth in Operating Profit of 296.3%, indicating very positive results. This trend has continued for the last four consecutive quarters, with PBT LESS OI(Q) growing at 184.43% and PAT(Q) growing at 175.0%. Additionally, the company's ROCE(HY) is at its highest at 10.36%.

Technically, the stock is currently in a bullish range and has shown improvement since January 29, 2024, generating 11.84% returns. Multiple factors, such as MACD, Bollinger Band, and KST, also indicate a bullish trend for the stock.

However, Centum Electronics has weak long-term fundamental strength, with an average ROCE of 8.71%. Its net sales have only grown at an annual rate of 5.10% over the last five years, indicating poor long-term growth. The company also has a high Debt to EBITDA ratio of 3.55 times, indicating a low ability to service debt.

The stock is currently trading at an expensive valuation with a 4.9 Enterprise value to Capital Employed, but it is still at a discount compared to its average historical valuations. In the past year, the stock has generated a return of 193.99%, while its profits have risen by 213.5%. The PEG ratio of the company is 0.4, indicating a potential undervaluation.

Furthermore, institutional investors have decreased their stake in Centum Electronics by -0.77% over the previous quarter, collectively holding 7.64% of the company. This decrease in participation by institutional investors may be a cause for concern for retail investors.

In conclusion, while Centum Electronics has shown positive financial results and technical trends, it also has weak long-term fundamentals and a decreasing interest from institutional investors. Therefore, MarketsMOJO has downgraded the stock to a 'Hold' recommendation.