Globus Spirits downgraded to 'Sell' by MarketsMOJO due to negative results and lack of interest from mutual funds

Globus Spirits, a smallcap company in the breweries industry, has recently been downgraded to a 'Sell' by MarketsMOJO on July 30, 2024. This decision was based on the company's negative results in the last quarter, with a significant decrease in its PAT(Q) at Rs 0.38 crore, falling by -98.9%. Additionally, the company's operating profit to interest (Q) and operating profit to net sales (Q) were at their lowest levels, at 3.25 times and 3.47% respectively.
Despite being a smallcap company, Globus Spirits has not gained much interest from domestic mutual funds, with only 0.72% of the company's shares being held by them. This could indicate that either the mutual funds are not comfortable with the company's current price or they have concerns about its business.

In the past year, Globus Spirits has underperformed the market (BSE 500) with negative returns of -3.18%, while the market has generated returns of 37.71%. However, the company has a strong ability to service its debt, with a low debt to EBITDA ratio of 0.84 times. It also has a healthy long-term growth rate, with net sales growing at an annual rate of 19.66% and operating profit at 26.97%.

The technical trend for the stock is currently sideways, indicating no clear price momentum. This is a change from its previous mildly bullish trend on July 29, 2024, which has resulted in a 7.97% decrease in returns. With a ROCE of 8.6, Globus Spirits has a very attractive valuation, with an enterprise value to capital employed ratio of 2.4. The stock is also trading at a discount compared to its average historical valuations.

However, it is important to note that while the stock has generated negative returns in the past year, its profits have also fallen by -20.8%. This could be a cause for concern for potential investors. Overall, MarketsMOJO's downgrade to 'Sell' for Globus Spirits is based on its recent negative performance and lack of interest from domestic mutual funds, despite its attractive valuation and healthy long-term growth.