Federal-Mogul Goetze (India) downgraded to 'Hold' despite positive results in first half of 2024

Federal-Mogul Goetze (India) is a smallcap company in the auto ancillary industry. Despite positive results in the first half of 2024, with a 23.06% growth in PAT and a highest ROCE of 16.60%, MarketsMOJO has downgraded its stock call to 'Hold' on September 2, 2024.
One of the reasons for this downgrade is the company's low Debt to Equity ratio, which is at 0 times on average. While this may seem like a positive factor, it also indicates that the company may not be utilizing debt to its advantage for growth.

Technically, the stock is in a Mildly Bullish range and both the MACD and KST technical factors are also Bullish. However, with a ROE of 11.4, the stock is trading at an attractive valuation with a 2.2 Price to Book Value. This suggests that the stock is currently trading at a fair value compared to its average historical valuations.

On the downside, the company has shown poor long-term growth with an annual rate of -2.01% in Operating profit over the last 5 years. Additionally, institutional investors have decreased their stake in the company by -0.53% over the previous quarter, holding only 0.54% collectively. This could be a cause for concern as institutional investors have better resources to analyze company fundamentals.

In the last 1 year, the stock has underperformed the market, generating a return of 20.60% compared to the market's (BSE 500) returns of 38.49%. This could be another reason for the downgrade in stock call.

Overall, while Federal-Mogul Goetze (India) has shown positive results in the first half of 2024, there are some concerns about its long-term growth and institutional investor participation. Investors may want to hold off on buying or selling the stock until there is more clarity on these factors.