Coffee Day Enterprises downgraded to 'Sell' by MarketsMOJO due to weak fundamentals and high debt.

Coffee Day Enterprises, a smallcap company in the lifestyle industry, has recently been downgraded to a 'Sell' by MarketsMOJO on 2024-07-22. 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 -202.74% CAGR growth in operating profits over the last 5 years. This indicates a decline in the company's financial performance. Additionally, Coffee Day Enterprises has a high debt to EBITDA ratio of -1.00 times, which means it may struggle to pay off its debts.

From a technical standpoint, the stock is currently in a mildly bearish range and has generated -1.74% returns since the downgrade. Multiple factors, such as MACD, Bollinger Band, and KST, are also indicating a bearish trend for the stock.

Another concerning factor is that 28.8% of the company's promoter shares are pledged. In a falling market, this can put additional downward pressure on the stock prices.

Furthermore, Coffee Day Enterprises has underperformed the market in the last 1 year, with a return of only 25.03% compared to the market's (BSE 500) returns of 35.14%.

However, there are some positive aspects to consider. The company has declared positive results for the last 4 consecutive quarters, with a 70.4% growth in PAT(Q). It also has a low debt-equity ratio of 0.48 times and a high debtors turnover ratio of 18.17 times, indicating efficient management of its finances.

Moreover, with a ROCE of 0.9, the company has an attractive valuation with a 0.5 enterprise value to capital employed. However, it is currently trading at a premium compared to its average historical valuations.

In the past year, while the stock has generated a return of 25.03%, its profits have risen by 140.8%. This gives the company a PEG ratio of 0.1, which suggests that it may be undervalued.

In conclusion, while Coffee Day Enterprises may have some positive aspects, the recent downgrade by MarketsMOJO and the various concerning factors indicate that it may be wise to approach this stock with caution. Investors should carefully consider all the information before making any investment decisions.