Liberty Shoes Downgraded to 'Sell' by MarketsMOJO, Long-Term Fundamentals Raise Concerns

Liberty Shoes, a microcap company in the consumer durables industry, has recently been downgraded to a 'Sell' by MarketsMOJO on November 13, 2024. This decision was based on several factors, including weak long-term fundamental strength with an average Return on Capital Employed (ROCE) of 7.54%, poor long-term growth with net sales growing at an annual rate of 0.79% and operating profit at 4.11% over the last 5 years, and a weak ability to service its debt with a poor EBIT to Interest (avg) ratio of 1.76.
In addition, the company's recent financial results for September 2024 showed a decline in profits, with a PAT(Q) of Rs 2.19 crore, falling at -45.4%. It is also worth noting that despite its size, domestic mutual funds hold only 0% of the company, which could indicate a lack of confidence in the company's performance or business.

On a positive note, the stock is currently in a mildly bullish range and its MACD and KST technical factors are also bullish. With a ROCE of 9.2, the stock has a very attractive valuation with a 3.5 Enterprise value to Capital Employed. It is also trading at a discount compared to its average historical valuations. Over the past year, the stock has outperformed the market (BSE 500) with a return of 74.34%, while its profits have risen by 45.9%. However, the PEG ratio of the company is 1.2, which could indicate that the stock may be overvalued.

In conclusion, while Liberty Shoes may have shown market-beating performance in the past year, its long-term fundamentals and debt-servicing ability raise concerns. Investors should carefully consider these factors before making any investment decisions.