Goyal Associates Ltd Downgraded to Strong Sell Amid Weak Fundamentals and Bearish Technicals

Quality Assessment: Weakening Fundamentals and Growth Concerns

Goyal Associates’ fundamental quality remains under pressure, with the company reporting flat financial performance in the second quarter of FY25-26. The average Return on Equity (ROE) stands at a modest 11.65%, which is below the threshold typically favoured by investors seeking robust profitability. Moreover, the company’s net sales have contracted at an annualised rate of -13.30%, indicating persistent top-line challenges.

Over the past year, profits have declined by approximately 18%, compounding concerns about the company’s ability to generate sustainable earnings growth. The cash and cash equivalents position is notably weak, with only ₹0.03 crore reported in the half-year period, raising questions about liquidity and operational flexibility. These factors collectively contribute to a weak long-term fundamental strength rating, which weighs heavily on the overall investment grade.

Valuation: Attractive but Reflective of Underlying Risks

Despite the weak fundamentals, Goyal Associates’ valuation metrics present a somewhat attractive picture. The stock trades at a Price to Book Value (P/BV) ratio of 0.9, suggesting it is priced below its book value and potentially undervalued relative to peers. This valuation is considered fair when benchmarked against the historical averages of comparable NBFCs.

However, the low valuation appears to be a reflection of the company’s deteriorating financial health and subdued growth prospects rather than a value opportunity. Investors should note that the stock’s 52-week high was ₹1.77, while it currently trades near its 52-week low of ₹0.86, underscoring significant price depreciation over the past year. The stock’s total return over one year is -38.71%, starkly underperforming the Sensex’s 8.65% gain during the same period.

Financial Trend: Flat Performance and Negative Returns

The financial trend for Goyal Associates has been largely flat to negative. The company’s quarterly results have shown no meaningful improvement, with revenues and profits stagnating or declining. The return metrics over various time horizons paint a bleak picture: a one-month return of -11.21%, a one-week return of -5.00%, and a five-year return of -52.50%, all significantly lagging the broader market benchmarks.

In contrast, the Sensex has delivered positive returns across these periods, highlighting the company’s underperformance within its sector and the broader market. This persistent negative trend has contributed to the downgrade in the investment rating, signalling caution for investors considering exposure to this stock.

Technical Analysis: Shift to Bearish Momentum

The downgrade to Strong Sell is primarily driven by a deterioration in technical indicators. The technical grade has shifted from mildly bearish to outright bearish, reflecting weakening momentum and negative price action signals. Key technical metrics reveal a mixed but predominantly negative outlook:

• MACD: Weekly readings remain mildly bullish, but the monthly MACD is bearish, indicating longer-term downward momentum.


• RSI: The weekly Relative Strength Index is bearish, signalling selling pressure, while the monthly RSI shows no clear signal.


• Bollinger Bands: Both weekly and monthly bands are bearish or mildly bearish, suggesting the stock price is trending towards the lower band, a sign of weakness.


• Moving Averages: Daily moving averages are bearish, confirming short-term downtrends.


• KST (Know Sure Thing): Weekly KST is mildly bullish, but monthly KST remains bearish, reinforcing the mixed but predominantly negative momentum.


• Dow Theory: Weekly data shows no clear trend, while monthly data is mildly bullish, indicating some longer-term uncertainty.

Overall, the technical picture is one of caution, with bearish signals outweighing bullish ones. The stock price remains stagnant at ₹0.95, unchanged from the previous close, and near its 52-week low, underscoring the lack of upward momentum.

Shareholding and Market Capitalisation Context

Goyal Associates is predominantly held by non-institutional shareholders, which may contribute to higher volatility and less stable investor support. The company’s market capitalisation grade stands at 4, reflecting its micro-cap status and associated liquidity risks. This factor further compounds the investment risk profile, especially in a challenging sector like NBFCs, which are sensitive to credit cycles and regulatory changes.

Comparative Performance: Underperforming the Sensex

When benchmarked against the Sensex, Goyal Associates’ returns have been disappointing across all time frames. Over one week, the stock declined by 5.00% compared to the Sensex’s modest 0.75% fall. Over one month, the stock’s loss of 11.21% far exceeded the Sensex’s 1.98% decline. Year-to-date, the stock’s return of -2.06% slightly outperformed the Sensex’s -2.32%, but this is overshadowed by the one-year return of -38.71% versus the Sensex’s positive 8.65%.

Longer-term returns are even more stark, with the stock down 30.15% over three years and 52.50% over five years, while the Sensex gained 36.79% and 68.52% respectively. Even over a decade, despite a 313.04% gain for the stock, it only marginally outperformed the Sensex’s 240.06%, reflecting a volatile and inconsistent performance history.

Conclusion: Downgrade Reflects Heightened Risks and Weak Outlook

The downgrade of Goyal Associates Ltd to a Strong Sell rating is a culmination of deteriorating technical indicators, weak financial trends, and unimpressive fundamental quality. While the valuation appears attractive on a Price to Book basis, this is largely a reflection of the company’s underlying challenges rather than a genuine value opportunity.

Investors should exercise caution given the bearish technical signals, flat to negative financial performance, and the company’s inability to generate consistent growth or profitability. The predominance of non-institutional shareholders and micro-cap status further increase the risk profile. Overall, the downgrade signals that Goyal Associates is currently not a favourable investment within the NBFC sector, especially when compared to broader market benchmarks and sector peers.

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