Gokul Agro Resources downgraded to 'Hold' by MarketsMOJO due to high valuation

Gokul Agro Resources, a smallcap company in the refined oil and vanaspati industry, has recently been downgraded to a 'Hold' by MarketsMOJO on November 5, 2024. This decision was based on the company's low Debt to Equity ratio, which is currently at 0 times. However, the company has shown healthy long-term growth with an annual increase of 27.96% in Net Sales and 36.32% in Operating profit. In fact, in the last quarter, the company declared very positive results with a growth in Net Profit of 19.56%. This trend has been consistent for the past two quarters.
The company's performance in the stock market has also been impressive, with a 150.38% return in the last year. It has also outperformed the BSE 500 in the last 3 years, 1 year, and 3 months. With a market cap of Rs 4,030 crore, Gokul Agro Resources is the second biggest company in the sector, constituting 22.44% of the entire industry. Its annual sales of Rs 15,686.66 crore make up 52.33% of the industry.

However, the stock is currently trading at a premium compared to its average historical valuations. Its ROCE of 28.6 also indicates a very expensive valuation with a 4.5 Enterprise value to Capital Employed. The PEG ratio of the company is 0.9, which suggests that the stock may be overvalued.

It is also worth noting that despite its size, domestic mutual funds hold only 0.18% of the company. This could indicate that they are not comfortable with the current price or the business itself. Overall, while Gokul Agro Resources has shown strong growth and performance in the market, investors may want to hold off on buying the stock at its current valuation.