Interglobe Aviation Receives 'Sell' Rating Due to Weak Fundamentals and High Debt

Interglobe Aviation, the parent company of India's largest airline IndiGo, has recently received a 'Sell' rating from MarketsMOJO. This downgrade is based on several factors that indicate a weak long-term fundamental strength for the company.
One of the main reasons for the 'Sell' rating is the high debt of Interglobe Aviation, with a debt-equity ratio of 9.51 times. This indicates a low ability to service debt and can be a cause for concern for investors. Additionally, the company has also shown poor long-term growth, with operating profit declining by an annual rate of 213.70% over the last 5 years.

Moreover, the promoters of the company have decreased their stake by 2% in the previous quarter, which may suggest a lack of confidence in the future of the business. On the positive side, Interglobe Aviation has declared positive results for the last 7 consecutive quarters, with a high ROCE (return on capital employed) of 22.93% and a high inventory turnover ratio of 110.28 times.

Technically, the stock is currently in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, KST, and DOW indicating a bullish trend. However, with a ROCE of 47.1, the stock is fairly valued with a 10 enterprise value to capital employed. It is also trading at a discount compared to its average historical valuations.

In terms of performance, Interglobe Aviation has outperformed the BSE 500 index in the last 3 years, 1 year, and 3 months, generating a return of 106.29%. However, while the stock has seen a significant increase in profits, the PEG ratio of the company is 0.2, indicating a potential overvaluation.

In conclusion, while Interglobe Aviation has shown market-beating performance in the long term, the recent downgrade to 'Sell' by MarketsMOJO highlights some concerning factors such as high debt and poor long-term growth. Investors should carefully consider these factors before making any investment decisions.