Kalyani Steels downgraded to 'Sell' by MarketsMOJO due to poor long-term growth and negative financial results

Kalyani Steels, a smallcap company in the steel/sponge iron/pig iron industry, has recently been downgraded to a 'Sell' by MarketsMOJO on September 30, 2024. This decision was based on the company's poor long-term growth, with net sales only growing at an annual rate of 6.18% and operating profit at 13.77% over the last 5 years.
In addition, the company's recent financial results for June 2024 have also been negative, with a -16.6% decrease in PAT(Q) at Rs 51.57 crore and the lowest cash and cash equivalents (HY) at Rs 541.05 crore. The net sales for the quarter were also at their lowest at Rs 461.46 crore.

Furthermore, Kalyani Steels has a high ROE of 14.1, making its valuation expensive with a price to book value of 2.2. The stock is currently trading at a premium compared to its average historical valuations. While the stock has generated a return of 59.16% in the past year, its profits have only risen by 16.2%, resulting in a PEG ratio of 1.

On the positive side, the company has a low debt to equity ratio (avg) of 0 times, indicating a strong financial position. The stock is also technically in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, and KST pointing towards a bullish trend.

Kalyani Steels is majority owned by promoters, and its market beating performance is evident with a return of 59.16% in the last year, compared to the market (BSE 500) returns of 39.48%. However, considering the recent downgrade and the company's financial performance, it may be wise for investors to approach this stock with caution.