Larsen & Toubro Upgraded to 'Hold' Rating by MarketsMOJO, Technical Improvement and Attractive Valuations

Larsen & Toubro, a leading capital goods company, has recently been upgraded to a 'Hold' rating by MarketsMOJO. This upgrade comes as the stock has shown a technical improvement, moving from a Mildly Bearish trend to a Mildly Bullish one. Since this change, the stock has generated a return of -1.72%.
One key technical factor that has contributed to this upgrade is the Bollinger Band, which has been Bullish since October 31, 2024. Additionally, with a ROCE of 16.8 and an attractive valuation with a 3.6 Enterprise value to Capital Employed, the stock is trading at a discount compared to its average historical valuations.

Over the past year, Larsen & Toubro has generated a return of 22.48%, while its profits have risen by 10.6%. However, the PEG ratio of the company is 2.8, indicating a potential for future growth.

With a high institutional holding of 62.53%, Larsen & Toubro has the support of investors with better capability and resources to analyze the fundamentals of the company.

Despite being the biggest company in the capital goods sector with a market cap of Rs 4,98,353 crore and annual sales of Rs 238,880.90 crore, which is 57.72% of the industry, Larsen & Toubro has a low ability to service debt with a high Debt to EBITDA ratio of 3.71 times. This could be a cause for concern for investors.

Moreover, the company has shown poor long-term growth with an annual rate of only 5.66% in operating profit over the last 5 years. In the latest quarter, the results were flat with the lowest operating cash flow of Rs 18,266.28 crore.

In conclusion, while Larsen & Toubro has shown some technical improvement and has attractive valuations, it also has some concerning factors such as high debt and poor long-term growth. Investors should carefully consider these factors before making any investment decisions.