Force Motors downgraded to 'Hold' by MarketsMOJO, despite strong growth and valuations.

Force Motors, a midcap company in the auto-trucks industry, has recently been downgraded to a 'Hold' by MarketsMOJO on October 28, 2024. This decision was based on the company's healthy long-term growth, with an annual operating profit growth rate of 45.61%. Additionally, the company declared very positive results in June 2024, with a growth in net profit of 66.12% and positive results for the last 8 consecutive quarters.
The company's PAT (HY) has grown at an impressive rate of 138.05%, while its net sales (HY) have grown at 30.84%. With a ROCE of 24.00%, Force Motors has the highest return on capital employed in its industry. Its ROE of 17.2 also indicates an attractive valuation with a price to book value of 3.8. Furthermore, the stock is currently trading at a discount compared to its average historical valuations.

In the past year, Force Motors' stock has generated a return of 83.23%, outperforming the market (BSE 500) returns of 34.46%. However, the company has a high debt to EBITDA ratio of 17.84 times, indicating a low ability to service debt. This is further supported by the company's low return on equity (avg) of 4.64%, signifying low profitability per unit of shareholders' funds.

Technically, the stock is currently in a mildly bearish range, with its technical trend deteriorating from mildly bullish on October 28, 2024. The stock's MACD and KST technical factors are also bearish, indicating a potential downward trend.

Interestingly, despite its size, domestic mutual funds hold only 1.22% of the company. This could signify that they are either not comfortable with the current price or the business itself. As domestic mutual funds have the capability to conduct in-depth on-the-ground research, their small stake in the company may raise some concerns.

In conclusion, while Force Motors has shown strong growth and attractive valuations, its high debt and low profitability may be a cause for concern. Investors may want to hold off on buying or selling the stock until there is more clarity on the company's financials and performance.