Foods & Inns Downgraded to 'Sell' by MarketsMOJO, High Debt and Low Profitability Cited

Foods & Inns, a microcap company in the FMCG industry, has recently been downgraded to a 'Sell' by MarketsMOJO on 2024-01-17. This decision was based on several factors, including the company's high debt to EBITDA ratio of 4.30 times, indicating a low ability to service debt. Additionally, the company's return on capital employed (avg) of 7.57% suggests low profitability per unit of total capital.
Technically, the stock is currently in a Mildly Bearish range, with a deteriorating trend since 23-Oct-23, resulting in -3.04% returns. Multiple indicators, such as MACD, Bollinger Band, and KST, also point towards a bearish outlook for the stock.

Furthermore, with a ROCE of 13.1, the stock is considered to be expensive with a 1.7 enterprise value to capital employed. However, it is currently trading at a discount compared to its average historical valuations. Over the past year, the stock has generated a return of 16.12%, while its profits have risen by 126.9%, resulting in a PEG ratio of 0.2.

In addition to these factors, there has been a decrease in promoter confidence, with promoters reducing their stake in the company by -2.04% over the previous quarter. Currently, they hold 26.77% of the company, which may signify reduced confidence in the future of the business.

Despite these concerns, there are some positive aspects to consider. The company has shown healthy long-term growth, with net sales growing at an annual rate of 30.59% and operating profit at 42.62%. Additionally, the company has declared positive results for the last 6 consecutive quarters, with net sales growing at 29.76% and PAT (HY) at Rs 27.79 cr growing at 34.61%. The company's highest ROCE (HY) at 14.21% is also a positive sign.

In conclusion, while Foods & Inns may have some positive aspects, the recent downgrade to 'Sell' by MarketsMOJO and other concerning factors suggest a cautious approach towards investing in this microcap FMCG company.