Larsen & Toubro Downgraded to 'Sell' by MarketsMOJO Due to High Debt and Poor Growth

Larsen & Toubro, a largecap company in the capital goods industry, has recently been downgraded to a 'Sell' by MarketsMOJO. This decision was based on several factors, including the company's high debt to EBITDA ratio of 3.71 times, indicating a low ability to service debt. Additionally, the company has shown poor long-term growth with only a 5.66% annual increase in operating profit over the last 5 years.
In the most recent quarter, Larsen & Toubro's operating cash flow was at its lowest at Rs 18,266.28 crore, and its cash and cash equivalents were also at their lowest at Rs 15,358.39 crore. This underperformance has also been reflected in the stock's returns, which have only generated a 15.35% return in the last year, compared to the market's (BSE 500) return of 36.68%.

Other factors contributing to the 'Sell' rating include a sideways technical trend, indicating no clear price momentum, and a high institutional holding of 62.12%. However, the company does have an attractive valuation with a ROCE of 16.8 and a 3.6 enterprise value to capital employed. It is also trading at a discount compared to its average historical valuations.

With a market cap of Rs 4,81,083 crore, Larsen & Toubro is the largest company in the capital goods sector, making up 35.60% of the entire industry. Its annual sales of Rs 228,350.36 crore also account for 56.56% of the industry. While the stock has generated a return of 15.35% in the last year, its profits have only risen by 18.9%, resulting in a PEG ratio of 1.7. Overall, the downgrade to 'Sell' by MarketsMOJO highlights the company's current struggles and potential risks for investors.