Five-Star Business Finance downgraded to 'Hold' by MarketsMOJO due to expensive valuation and decrease in promoter confidence

Five-Star Business Finance, a largecap finance company, has recently been downgraded to a 'Hold' by MarketsMOJO on October 30, 2024. This decision was based on the company's strong long-term fundamental strength, with a 32.80% CAGR growth in operating profits. The company has also declared positive results for the last 8 consecutive quarters, with its net sales and PBDIT reaching their highest levels at Rs 702.05 cr and Rs 524.23 cr respectively.
Technically, the stock is currently in a mildly bullish range and has shown improvement since October 14, 2024, generating a return of -7.38%. Multiple factors, such as MACD, Bollinger Band, KST, and DOW, indicate a bullish trend for the stock.

However, with a ROE of 17.6, the stock is currently trading at a very expensive valuation with a 5 price to book value. It is also trading at a discount compared to its average historical valuations. Although the stock has generated a return of 4.67% in the past year, its profits have risen by 39%, resulting in a PEG ratio of 0.8.

Moreover, there has been a decrease in promoter confidence as they have reduced their stake in the company by -4.92% over the previous quarter and currently hold 21.59% of the company. This could signify reduced confidence in the future of the business.

In the last 1 year, the stock has underperformed the market, generating a return of only 4.67% compared to the market (BSE 500) returns of 34.53%. Based on these factors, MarketsMOJO has downgraded the stock to a 'Hold' and recommends investors to carefully monitor the company's performance before making any investment decisions.