Frontier Springs Receives 'Hold' Rating from MarketsMOJO, Shows Strong Performance in Recent Quarter

Frontier Springs, a microcap company in the auto ancillary industry, has recently received a 'Hold' rating from MarketsMOJO on October 7th, 2024. This downgrade is due to the company's low Debt to Equity ratio, which is at an average of 0.02 times.
However, the company has shown outstanding results in the June 2024 quarter with a growth in net profit of 275.27%. In fact, Frontier Springs has declared positive results for the last four consecutive quarters, with the highest ROCE (HY) at 18.99% and net sales (Q) at Rs 50.75 crore. Additionally, the company's PBDIT (Q) is also at its highest at Rs 9.74 crore.

Technically, the stock is in a mildly bullish range with multiple factors such as MACD, KST, and DOW indicating a bullish trend. Furthermore, Frontier Springs has consistently generated returns over the last three years and has outperformed BSE 500 in each of the last three annual periods, with a return of 189.00% in the last year alone.

However, the company's long-term growth has been poor, with net sales growing at an annual rate of 12.54% and operating profit at 8.34% over the last five years. Additionally, with a ROE of 20.3, the stock is currently trading at a very expensive valuation with a price to book value of 8.4. This is also reflected in the fact that the stock is trading at a premium compared to its average historical valuations.

Moreover, despite its size, domestic mutual funds hold only 0% of the company, which could indicate that they are not comfortable with the price or the business. This is significant as domestic mutual funds have the capability to conduct in-depth on-the-ground research on companies.

In conclusion, while Frontier Springs has shown strong performance in the recent quarter, its long-term growth and expensive valuation may be a cause for concern. Investors may want to hold off on investing in this microcap company until further research is conducted.