Hester Biosciences downgraded to 'Hold' by MarketsMOJO, despite recent positive financial performance

Hester Biosciences, a smallcap pharmaceutical and biotechnology company, has recently been downgraded to a 'Hold' by MarketsMOJO on November 12, 2024. This decision was based on various factors, including the company's recent financial performance and market trends.
In the last quarter, Hester Biosciences reported a growth in net profit of 198.39%, indicating a very positive result. This trend has continued for the past two consecutive quarters, showcasing the company's consistent positive performance. Additionally, the company's operating cash flow has been the highest at Rs 48.13 crore, while its return on capital employed (ROCE) has also been the highest at 10.77%. Furthermore, the company's debt-equity ratio is at a low of 0.81 times, indicating a strong financial position.

Technically, the stock is currently in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, and KST pointing towards a bullish trend. In terms of market performance, Hester Biosciences has outperformed the market (BSE 500) with a return of 60.69% in the last year, compared to the market's return of 27.99%.

However, the company's long-term growth has been poor, with an annual growth rate of -14.37% in operating profit over the last 5 years. This, coupled with a high ROCE of 8.9, indicates a very expensive valuation with an enterprise value to capital employed ratio of 4.6. Despite this, the stock is currently trading at a discount compared to its average historical valuations.

It is also worth noting that despite its size, domestic mutual funds hold only 0% of the company's shares. This could signify that they are either not comfortable with the current price or have not conducted in-depth research on the company. However, domestic mutual funds have the capability to conduct thorough on-the-ground research, making their small stake in the company a potential red flag.

In conclusion, while Hester Biosciences has shown strong financial performance and market trends, its long-term growth and valuation may be a cause for concern. Investors are advised to hold their positions and closely monitor the company's future performance.