Finolex Cables downgraded to 'Hold' by MarketsMOJO due to expensive valuation and underperformance

Finolex Cables, a leading player in the cable industry, has recently been downgraded to a 'Hold' by MarketsMOJO on September 30, 2024. This decision was based on various factors, including the company's low Debt to Equity ratio, which stands at 0 times on average.

Despite positive results in June 2024, with the highest DEBTORS TURNOVER RATIO(HY) at 28.25 times, PBT LESS OI(Q) at Rs 271.42 cr., and PAT(Q) at Rs 243.92 cr., the stock is currently in a Mildly Bullish range. The technical factors of MACD and OBV also indicate a Bullish trend.

However, the company has shown poor long-term growth, with Net Sales growing at an annual rate of 10.25% and Operating profit at 1.92% over the last 5 years. Additionally, with a ROE of 13.2, the stock is currently trading at a Very Expensive valuation with a 4.4 Price to Book Value. This is significantly higher than its average historical valuations.

In the past year, while the stock has generated a return of 25.96%, its profits have only risen by 34.9%. This results in a PEG ratio of 0.8, indicating that the stock is trading at a premium compared to its earnings growth potential.

Furthermore, Finolex Cables has underperformed the market in the last 1 year, with a return of 25.96%, much lower than the market (BSE 500) returns of 39.48%. Considering these factors, MarketsMOJO has downgraded the stock to a 'Hold' and recommends investors to carefully evaluate their investment decisions.