eClerx Services Downgraded to 'Sell' by MarketsMOJO, Indicating Caution for Investors

eClerx Services, a midcap BPO/ITeS company, has recently been downgraded to a 'Sell' by MarketsMOJO on June 5, 2024. This decision was based on various factors, including poor long-term growth with net sales and operating profit growing at a rate of 15.38% and 14.34% respectively over the last 5 years. Additionally, the company's results for March 2024 were flat, with the lowest ROCE (HY) at 28.44% and DEBTORS TURNOVER RATIO (HY) at 5.90 times.
Technically, the stock is currently in a Mildly Bearish range, with the technical trend deteriorating from Sideways on June 5, 2024, and generating -1.37% returns since then. Multiple factors, such as MACD, Bollinger Band, and KST, also indicate a bearish trend for the stock.

However, the company does have some positive aspects, such as high management efficiency with a ROE of 21.30% and a low Debt to Equity ratio (avg) of 0 times. Its ROE of 22.8 also suggests a fair valuation with a 4.6 Price to Book Value. However, the stock is currently trading at a premium compared to its average historical valuations.

In the past year, while the stock has generated a return of 24.11%, its profits have only risen by 4.9%, resulting in a PEG ratio of 4.2. Additionally, the company has a high institutional holding of 34.95%, indicating that these investors have better capability and resources to analyze the company's fundamentals compared to retail investors.

With a market cap of Rs 10,644 crore, eClerx Services is the second biggest company in the BPO/ITeS sector, constituting 32.69% of the entire sector. Its annual sales of Rs 2,925.55 crore also make up 19.66% of the industry. Overall, while the company has some positive aspects, the recent downgrade by MarketsMOJO suggests that investors should approach with caution when considering investing in eClerx Services.