Enkei Wheels India Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals and High Debt.

Enkei Wheels India, a smallcap auto ancillary company, has recently been downgraded to a 'Sell' by MarketsMOJO on October 22, 2024. This decision was based on several factors, including weak long-term fundamental strength, poor growth, and high debt to EBITDA ratio. The company's average Return on Capital Employed (ROCE) over the last 5 years has been 2.49%, indicating a weak performance. Additionally, its net sales have only grown at an annual rate of 12.10% over the same period.
Furthermore, Enkei Wheels India has a high Debt to EBITDA ratio of 4.05 times, indicating a low ability to service debt. Its ROCE of 4.8 also suggests an expensive valuation, with a 3.5 Enterprise value to Capital Employed. However, the stock is currently trading at a discount compared to its average historical valuations.

In the past year, the stock has generated a return of 12.13%, while its profits have risen by 514.1%. This has resulted in a PEG ratio of 0.1, indicating that the stock may be overvalued. It is also worth noting that despite its small size, domestic mutual funds hold only 0% of the company, which could suggest that they are not comfortable with the price or the business.

Enkei Wheels India has also underperformed the market in the last year, with a return of 12.13% compared to the market's (BSE 500) return of 31.91%. However, the company has declared positive results for the last 4 consecutive quarters, with its PAT (HY) growing at 179.67%, operating CF (Y) at its highest at Rs 58.51 crore, and net sales (HY) growing at 36.17%.

From a technical standpoint, the stock is currently in a mildly bullish range, with multiple factors such as MACD, KST, and DOW indicating a bullish trend. However, it is important to note that MarketsMOJO's downgrade to 'Sell' suggests caution for potential investors.