Indiamart Intermesh downgraded to 'Hold' by MarketsMOJO, despite strong fundamentals and positive results

Indiamart Intermesh, a midcap IT software company, has recently been downgraded to a 'Hold' by MarketsMOJO on October 21, 2024. This decision was based on the company's strong long-term fundamental strength, with an average Return on Equity (ROE) of 23.99%, and healthy long-term growth, as evidenced by its annual operating profit growth rate of 27.72%. Additionally, the company has a low Debt to Equity ratio, averaging at 0 times.
In terms of financial performance, Indiamart Intermesh has declared very positive results for the quarter ending September 24, with a growth in net profit of 18.05%. This marks the sixth consecutive quarter of positive results for the company. Its operating cash flow for the year is also at a high of Rs 559.17 crore, while its Return on Capital Employed (ROCE) for the half-year is at a peak of 30.57%. Furthermore, its net sales for the quarter are at a record high of Rs 347.70 crore.

However, the technical trend for the stock is currently sideways, indicating no clear price momentum. The trend has also deteriorated from bullish to -16.87% returns since October 21, 2024. On the institutional front, the company has a high institutional holding of 35.19%, indicating that these investors have better capabilities and resources to analyze the company's fundamentals compared to retail investors. Their stake has also increased by 1.5% over the previous quarter.

Indiamart Intermesh is among the top 1% of companies rated by MarketsMojo across all 4,000 stocks, with an ROE of 19.3. However, this also means that the stock is currently trading at a very expensive valuation, with a price to book value of 10.4. Despite this, the stock is currently trading at a discount compared to its average historical valuations. Over the past year, while the stock has generated a return of -7.84%, its profits have risen by 13.5%, resulting in a PEG ratio of 3.1.

In terms of performance, Indiamart Intermesh has underperformed the BSE 500 index in the last 3 years, 1 year, and 3 months, with a return of -7.84% in the last year. This indicates a below-par performance in both the long-term and near-term. Overall, MarketsMOJO has downgraded the stock to 'Hold' due to its expensive valuation and underperformance in the market.