Jagatjit Industries Receives 'Sell' Rating Due to Weak Fundamental Strength

Jagatjit Industries, a microcap company in the breweries industry, has recently received a 'Sell' rating from MarketsMOJO on May 7, 2024. This downgrade is due to several factors that indicate a weak long-term fundamental strength for the company.
One of the main concerns is the high level of debt that Jagatjit Industries carries, with a debt to equity ratio of 3.59 times. This indicates a high level of financial risk for the company. Additionally, the company's operating profit has only grown at an annual rate of 17.66% over the last 5 years, which is considered poor long-term growth.

In terms of recent financial performance, the company's results for December 2023 were flat, with a decrease in profit after tax of 40.38%. Furthermore, the company's non-operating income was 754.55% of its profit before tax, which may not be sustainable in the long run. The earnings per share for the quarter were also at a low of Rs 0.13.

Another concerning factor is the low level of ownership by domestic mutual funds, with only 0.11% of the company's shares held by them. This may indicate that they are not comfortable with the company's current price or its business.

On a positive note, the stock is currently in a mildly bullish range and its MACD and KST technical factors are also bullish. Additionally, with a ROCE of 1.8, the stock is considered to have an attractive valuation with a 3.7 enterprise value to capital employed. It is also trading at a discount compared to its historical valuations.

However, it is important to note that while the stock has generated a return of 81.36% in the past year, its profits have only increased by 37.3%. This results in a PEG ratio of 1.9, which may indicate that the stock is overvalued.

In the last 3 years, Jagatjit Industries has consistently outperformed the BSE 500 index, generating a return of 81.36%. However, this may not be sustainable in the long run if the company's fundamental strength does not improve.

Overall, the recent downgrade to 'Sell' by MarketsMOJO highlights the concerns surrounding Jagatjit Industries and its high debt and weak long-term growth. Investors should carefully consider these factors before making any investment decisions.