Devyani International Downgraded to 'Sell' by MarketsMOJO Due to High Debt and Poor Performance

Devyani International, a largecap company in the lifestyle industry, has recently been downgraded to a 'Sell' by MarketsMOJO on October 18, 2024. This decision was based on several factors, including the company's high debt-to-equity ratio, flat results in June 2024, and low return on capital employed.
One of the main reasons for the downgrade is the company's high debt levels, with a debt-to-equity ratio of 0 times on average. This indicates that the company may be facing financial challenges and may struggle to generate profits in the future.

In addition, the company's performance in the first half of 2024 has been disappointing, with a decline of 68.76% in profits and a 33.10% increase in interest expenses. This has resulted in a low return on capital employed of only 5.16%.

Furthermore, Devyani International's valuation is considered expensive, with a ROCE of 4.6 and an enterprise value to capital employed ratio of 6.3. This suggests that the stock may be overvalued and not a good investment option at this time.

The stock has also underperformed the market in the last year, generating negative returns of -14.23% while the market (BSE 500) has seen a return of 34.39%. This indicates that the company has not been able to keep up with the overall market performance.

On the positive side, Devyani International has shown healthy long-term growth in terms of net sales and operating profit, with an annual growth rate of 41.26% and 44.67%, respectively. However, the technical trend for the stock is currently sideways, indicating no clear price momentum.

It is also worth noting that the company has a high institutional holding of 25.87%, which may suggest that these investors have better resources and capabilities to analyze the company's fundamentals. However, their stake has only increased by 1.24% in the previous quarter.

In conclusion, while Devyani International may have shown promising growth in the past, its current financial situation and stock performance have led to a 'Sell' rating from MarketsMOJO. Investors should carefully consider these factors before making any investment decisions.