Eco Recycling Downgraded to 'Hold' by MarketsMOJO, Despite Strong Financial Performance

Eco Recycling, a smallcap company in the trading industry, has recently been downgraded to a 'Hold' by MarketsMOJO on September 12, 2024. This decision was based on the company's recent financial performance and technical indicators.
In the last quarter, Eco Recycling reported a growth in net profit of 393.94%, showcasing outstanding results. This positive trend has been consistent for the past 5 consecutive quarters. The company's ROCE (HY) is also at a high of 31.85%, with net sales (Q) and PBDIT (Q) reaching their highest at Rs 11.40 crore and Rs 8.19 crore, respectively.

Technically, the stock is currently in a mildly bullish range, with both MACD and KST technical factors showing a bullish trend. Additionally, the stock has consistently outperformed BSE 500 in the last 3 annual periods, generating a return of 384.61% in the last year alone.

However, there are some concerns regarding the company's ability to service debt, as it has a high debt to EBITDA ratio of 4.83 times. This could potentially impact the company's long-term growth and profitability, as seen in the annual growth rate of net sales at 19.04% over the last 5 years.

Moreover, with a ROE of 26.9, the stock is currently trading at a very expensive valuation with a price to book value of 30.2. This is significantly higher than its average historical valuations. The PEG ratio of the company is also at 0.6, indicating that the stock may be overvalued.

It is also worth noting that despite its smallcap size, domestic mutual funds hold only 0% of the company. This could suggest that either they are not comfortable with the current price or they have not conducted in-depth research on the company.

In conclusion, while Eco Recycling has shown strong financial performance and technical indicators, there are some concerns regarding its debt and valuation. Investors may want to hold off on buying or selling the stock until further developments.