Lehar Footwears Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals and High Debt

Lehar Footwears, a microcap company in the leather industry, has recently been downgraded to a 'Sell' by MarketsMOJO on October 28, 2024. This decision was based on several factors, including weak long-term fundamental strength, poor growth in operating profit, and a high debt to EBITDA ratio.
One of the main reasons for the downgrade is the company's average Return on Capital Employed (ROCE) of 5.88%, which is considered weak. Additionally, the company has only seen a 13.25% annual growth in operating profit over the last 5 years, indicating a lack of long-term growth potential.

Furthermore, Lehar Footwears has a high Debt to EBITDA ratio of 4.32 times, which means it may struggle to service its debt. This, combined with a Very Expensive valuation with a 3 Enterprise value to Capital Employed, makes the stock trading at a premium compared to its historical valuations.

In the past year, the stock has generated a return of 56.71%, but its profits have fallen by -6.7%. This suggests that the stock may be overvalued and not performing as well as its market price indicates.

On the positive side, the company has seen growth in net sales, with a 30.2% increase in the last quarter. Its PBDIT and PBT LESS OI have also reached their highest levels at Rs 5.88 cr and Rs 3.06 cr, respectively.

Technically, the stock is in a Mildly Bullish range, with multiple factors such as MACD, Bollinger Band, DOW, and OBV indicating a bullish trend. However, the majority shareholders of Lehar Footwears are promoters, which may raise concerns about the company's governance and decision-making.

Despite generating consistent returns over the last 3 years and outperforming BSE 500, the recent downgrade by MarketsMOJO suggests that Lehar Footwears may not be a good investment option at this time. Investors should carefully consider the company's financial health and future prospects before making any decisions.