IRB Infrastructure Developers Downgraded to 'Sell' by MarketsMOJO Due to High Debt and Poor Profitability

IRB Infrastructure Developers, a largecap company in the capital goods industry, has recently been downgraded to a 'Sell' by MarketsMOJO on October 7, 2024. This downgrade is based on several factors, including the company's high debt to EBITDA ratio of 4.65 times, indicating a low ability to service debt. Additionally, the company has a low return on equity of 4.91%, showing poor profitability per unit of shareholders' funds.
Furthermore, IRB Infrastructure Developers has shown poor long-term growth, with its operating profit growing at an annual rate of -0.51% over the last 5 years. In the latest quarter, the company's interest expenses have grown by 21.45%, while its debt-equity ratio is at its highest at 1.36 times. The company's profits have also fallen by -7.6% in the same quarter.

With a ROCE of 7.7, the company's valuation is considered very expensive with an enterprise value to capital employed ratio of 1.7. However, the stock is currently trading at a discount compared to its average historical valuations. While the stock has generated a return of 72.48% in the past year, its profits have only risen by 24.8%, resulting in a PEG ratio of 2.2.

Another concerning factor for IRB Infrastructure Developers is that 55.27% of its promoter shares are pledged. In a falling market, this can put additional downward pressure on the stock prices. Moreover, the proportion of pledged holdings has increased by 6.42% over the last quarter.

On a technical level, the stock's trend is currently sideways, indicating no clear price momentum. The technical trend has also deteriorated from mildly bullish on October 7, 2024, resulting in a -6.1% return since then.

Despite these factors, IRB Infrastructure Developers has consistently generated returns over the last 3 years, outperforming the BSE 500 index in each of the last 3 annual periods. However, based on the current market conditions and the company's financial performance, MarketsMOJO has downgraded the stock to a 'Sell'. Investors should carefully consider these factors before making any investment decisions.