CHD Chemicals Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals and High Debt

CHD Chemicals, a microcap trading company, has recently been downgraded to a 'Sell' by MarketsMOJO on June 18, 2024. This decision was based on several factors, including weak long-term fundamental strength, low ability to service debt, and low profitability per unit of shareholders' funds.
One of the main reasons for the downgrade is the company's -17.20% CAGR growth in operating profits over the last 5 years. This indicates a lack of consistent growth and stability in the company's financial performance. Additionally, CHD Chemicals has a high debt to EBITDA ratio of 7.29 times, which raises concerns about its ability to manage its debt.

Furthermore, the company's return on equity (avg) is only 2.40%, which is considered low and reflects its low profitability. In the last quarter, CHD Chemicals reported its lowest EPS (Q) at Rs 0.02, indicating a decline in its earnings.

On a positive note, the stock is technically in a mildly bullish range and has multiple factors that are mildly bullish, such as MACD, Bollinger Band, KST, DOW, and OBV. However, with a ROCE of 1.9, the stock is considered to have a very attractive valuation with a 0.7 enterprise value to capital employed.

Moreover, the stock is currently trading at a discount compared to its average historical valuations, making it an attractive option for investors. In the past year, the stock has generated a return of 32.08%, while its profits have risen by 22%. This results in a PEG ratio of 0, indicating that the stock is undervalued.

It is worth noting that the majority of CHD Chemicals' shareholders are non-institutional investors. This may suggest a lack of confidence from larger, more experienced investors in the company's potential for growth.

In conclusion, while CHD Chemicals may have some positive technical indicators, its weak fundamental strength and low profitability make it a risky investment. Investors should carefully consider these factors before making any decisions regarding this microcap trading company.