Davangere Sugar Company Receives 'Hold' Rating from MarketsMOJO, Showing Potential for Growth Despite Concerns

Davangere Sugar Company, a microcap company in the sugar industry, has recently received a 'Hold' rating from MarketsMOJO. This upgrade is based on the company's healthy long-term growth, with a 20.99% annual growth rate in net sales and a 63.93% growth in operating profit. The technical trend has also improved, with the stock moving from a sideways trend to a mildly bullish one on January 10, 2024. The key technical factor, RSI, has been bullish since January 10, 2024.
However, the company's management efficiency is a cause for concern, with a low ROCE of 6.53%. This signifies a low profitability per unit of total capital, including equity and debt. Additionally, the company has a high debt to EBITDA ratio of 5.82 times, indicating a low ability to service debt. The return on equity is also low at 3.16%.

In the last quarter, the company's results have been flat, with the lowest net sales and EPS at Rs 26.92 crore and Rs 0.10, respectively. With a ROCE of 8, the company's valuation is considered very expensive, with an enterprise value to capital employed ratio of 1.9. However, the stock is currently trading at a discount compared to its historical valuations.

Despite being a microcap company, domestic mutual funds hold only 0% of the company. This could indicate that they are not comfortable with the current price or the business itself. In the last year, the stock has underperformed the market, with a return of only 2.72% compared to the market's 28.66% return.

Overall, while Davangere Sugar Company has shown potential for growth, its management efficiency and high debt levels are areas of concern. Investors may want to hold onto their positions for now and monitor the company's performance in the future.