Data Patterns (India) Shows Strong Growth, But Valuation May Not Be Sustainable

Data Patterns (India), a midcap IT software company, has recently been downgraded to a 'Hold' by MarketsMOJO on July 1, 2024. This decision was based on the company's low Debt to Equity ratio, which is currently at 0 times.
However, the company has shown healthy long-term growth with an annual increase of 29.32% in Net Sales and 63.06% in Operating profit. In the last quarter, Data Patterns (India) has also reported positive results with a 42.04% growth in PAT (9M) and 83.1% growth in PBT LESS OI (Q). Additionally, the company's Operating profit to Interest (Q) ratio is at its highest at 30.70 times.

Technically, the stock is in a Mildly Bullish range with its Bollinger Band and KST technical factors also showing a Bullish trend. Furthermore, the company has a high institutional holding of 26.15%, indicating that these investors have better capabilities and resources to analyze the fundamentals of the company compared to retail investors. In fact, their stake in the company has increased by 10.26% in the previous quarter.

Data Patterns (India) has also shown a market-beating performance with a return of 62.95% in the last year, which is significantly higher than the market (BSE 500) returns of 37.64%. However, with a ROE of 15.6, the company's valuation is considered Very Expensive with a Price to Book Value of 14.6. This is trading at a premium compared to its average historical valuations. Moreover, while the stock has generated a high return in the past year, its profits have only increased by 46.5%, resulting in a PEG ratio of 2.

Overall, Data Patterns (India) has shown strong growth and performance in the past year, but its current valuation may not be sustainable in the long run. Investors are advised to hold onto their stocks for now and monitor the company's future performance closely.