Firstsource Solutions Receives 'Hold' Rating from MarketsMOJO Due to Neutral Stance and Strong Debt Servicing Ability

Firstsource Solutions, a leading BPO/ITeS company in the largecap industry, has recently received a 'Hold' rating from MarketsMOJO on October 4th, 2024. This downgrade is based on various factors that suggest a neutral stance on the stock.
One of the main reasons for the 'Hold' rating is the company's strong ability to service its debt. With a low Debt to EBITDA ratio of 1.37 times, Firstsource Solutions has a good financial standing. Additionally, the stock is currently in a Mildly Bullish range, with multiple factors such as MACD, KST, and DOW indicating a bullish trend.

Moreover, the company has an attractive valuation with a ROCE of 13.9 and an Enterprise value to Capital Employed ratio of 4.5. This suggests that the stock is trading at a discount compared to its average historical valuations. However, despite generating a return of 88.50% in the past year, the company's profits have fallen by -5.5%.

Firstsource Solutions also has a high institutional holding of 28.87%, indicating that these investors have better resources and capabilities to analyze the company's fundamentals. Furthermore, the stock has a market-beating performance in the long term, outperforming the BSE 500 index in the last 3 years, 1 year, and 3 months.

However, the company's long-term growth has been poor, with operating profit growing at an annual rate of only 7.47% over the last 5 years. In the latest quarter, the company's results were flat, with the lowest operating cash flow and the highest interest expenses.

Despite being the biggest company in the sector with a market cap of Rs 21,627 crore and annual sales of Rs 6,598.14 crore, which is 42.90% of the industry, Firstsource Solutions' poor long-term growth and recent flat results have led to the 'Hold' rating by MarketsMOJO. Investors are advised to carefully consider these factors before making any investment decisions.