Quality Assessment: Operational and Profitability Challenges
Goodyear India's recent financial disclosures reveal challenges in operational performance and profitability metrics. The company reported a decline in operating profit at an annual rate of 7.89% over the past five years, signalling subdued growth in core earnings. The latest half-year period ending September 2025 showed a profit after tax (PAT) of ₹27.18 crores, reflecting a contraction of 33.33% compared to the previous corresponding period.
Return on Capital Employed (ROCE) for the half-year stood at 10.28%, which is relatively low for the industry, indicating limited efficiency in generating returns from capital investments. Additionally, the dividend per share (DPS) for the year was recorded at ₹23.90, marking one of the lowest payouts in recent years. These factors collectively suggest that the company is facing headwinds in sustaining quality earnings and shareholder returns.
However, it is important to note that management efficiency remains a positive aspect, with a return on equity (ROE) of 16.15%, which is comparatively robust. The company also maintains a low average debt-to-equity ratio of zero, reflecting a conservative capital structure and limited reliance on external borrowings.
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Valuation Perspective: Premium Pricing Amidst Underperformance
From a valuation standpoint, Goodyear India is trading at a premium relative to its historical averages and peer group. The price-to-book value ratio stands at 3.4, which is considered elevated within the Tyres & Rubber Products sector. This premium valuation is notable given the company's recent financial performance and market returns.
Over the past year, the stock price has declined by 16.97%, contrasting with a 4.15% gain in the broader market index. This underperformance extends over longer horizons as well, with the stock generating a negative return of 24.01% over three years, while the benchmark index posted a 36.01% gain during the same period. The five-year and ten-year returns further illustrate this trend, with Goodyear India delivering -25.57% and +51.12% respectively, compared to the benchmark's 86.59% and 236.24% returns.
These figures indicate that the stock's current valuation may not be fully supported by its historical price appreciation or earnings growth, raising questions about the sustainability of its premium pricing.
Financial Trend Analysis: Recent Quarter and Year-to-Date Performance
The financial trend for Goodyear India in the recent quarter and year-to-date periods reflects subdued momentum. The company posted negative results in the quarter ending September 2025, with profits contracting by 28.9% over the past year. This decline in profitability aligns with the broader trend of operating profit shrinking annually over the last five years.
Year-to-date returns for the stock are down by 15.03%, while the Sensex benchmark has recorded an 8.91% gain in the same timeframe. Monthly and weekly returns also show a negative trajectory, with the stock falling 12.88% over one month and 1.79% over one week, compared to the Sensex's positive returns of 2.27% and 0.63% respectively.
These trends suggest that Goodyear India has been facing challenges in maintaining competitive financial performance relative to the broader market and its sector peers.
Technical Indicators: Mixed Signals with a Bearish Tilt
The technical landscape for Goodyear India presents a complex picture with several indicators signalling caution. Weekly and monthly Moving Average Convergence Divergence (MACD) readings are bearish, indicating downward momentum in the medium and longer term. Bollinger Bands on both weekly and monthly charts also suggest bearish conditions, reinforcing the view of potential price weakness.
Relative Strength Index (RSI) on the weekly chart shows bullish tendencies, but the monthly RSI does not provide a clear signal, reflecting uncertainty in momentum over different timeframes. Moving averages on the daily chart are mildly bullish, hinting at some short-term support for the stock price.
Other technical tools such as the Know Sure Thing (KST) indicator show bearish trends on the weekly scale but mild bullishness monthly, while Dow Theory analysis indicates mildly bearish conditions on both weekly and monthly charts. The stock's price recently traded at ₹853.85, slightly below the previous close of ₹862.75, with a 52-week range between ₹806.00 and ₹1,078.00.
Overall, the technical assessment points to a shift from a sideways trend to a mildly bearish stance, suggesting that market participants may be cautious in the near term.
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Comparative Performance and Market Context
When viewed against the broader market and sector indices, Goodyear India's performance highlights a divergence from prevailing trends. The Sensex has delivered positive returns across multiple timeframes, including 8.91% year-to-date and 4.15% over the past year, while Goodyear India has lagged behind with negative returns in these periods.
Within the Tyres & Rubber Products sector, the stock's premium valuation contrasts with its subdued earnings growth and profitability metrics. This disparity may influence investor sentiment and market positioning, especially as the company navigates operational challenges and evolving market dynamics.
Promoter holdings remain significant, providing a degree of stability in ownership structure. The company's conservative debt profile further supports its financial resilience, although the current earnings trajectory and valuation raise questions about near-term growth prospects.
Outlook and Considerations for Investors
Investors analysing Goodyear India should consider the interplay of quality, valuation, financial trends, and technical indicators in forming a comprehensive view. The recent shift in market assessment reflects a cautious stance driven by weaker profitability, premium valuation levels, and mixed technical signals.
While management efficiency and a low debt burden are positive attributes, the company's earnings contraction and underperformance relative to benchmarks suggest that challenges remain. The technical indicators imply that the stock may face resistance in regaining upward momentum in the short to medium term.
Given these factors, market participants may wish to monitor upcoming financial results and sector developments closely, alongside broader economic conditions impacting the automotive and tyre industries.
Summary
Goodyear India's recent market assessment shift is underpinned by a combination of subdued financial performance, premium valuation, and cautious technical indicators. The stock's returns have lagged behind key benchmarks, and operational metrics point to challenges in sustaining growth and profitability. While certain strengths such as management efficiency and capital structure provide support, the overall outlook suggests a need for careful evaluation by investors considering exposure to this Tyres & Rubber Products sector company.
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