Federal Bank downgraded to 'Hold' by MarketsMOJO, but shows strong fundamentals and growth potential

Federal Bank, one of the leading private banks in India, has recently been downgraded to a 'Hold' by MarketsMOJO on April 18, 2024. This decision was based on the company's current performance and future potential.
Despite having strong lending practices with a low Gross NPA ratio of 2.36%, Federal Bank's stock has been downgraded due to its technical trend being sideways, indicating no clear price momentum. However, the technical trend has improved since March 21, 2024, generating a return of 1.47% since then.

On the fundamental front, Federal Bank has shown strong long-term growth with a 29.84% CAGR in net profits. The company has also declared positive results for the last 10 consecutive quarters, with its NII(Q) at the highest of Rs 2,123.36 crore and PAT(Q) at the highest of Rs 1,006.74 crore. Its interest earned(Q) has also grown at a rate of 29.25%.

With a ROA of 1.3, Federal Bank has a very attractive valuation with a price to book value of 1.4. It is currently trading at a fair value compared to its average historical valuations. However, in the past year, while the stock has generated a return of 15.53%, its profits have risen by 40.3%, resulting in a PEG ratio of 0.5.

It is worth noting that Federal Bank has a high institutional holding of 74.08%, indicating that these investors have better capability and resources to analyze the company's fundamentals compared to retail investors.

Despite underperforming the market in the last year with a return of 15.53%, much lower than the market's (BSE 500) return of 35.47%, Federal Bank remains a strong player in the private banking industry with its consistent positive results and strong long-term growth potential.