Lokesh Machines downgraded to 'Sell' by MarketsMOJO due to weak fundamentals and high debt

Lokesh Machines, a microcap engineering company, has recently been downgraded to a 'Sell' by MarketsMOJO. This decision was based on several factors, including weak long-term fundamental strength, low ability to service debt, and low profitability per unit of shareholders funds.
One of the main reasons for the downgrade is the company's weak long-term performance, with a -0.96% CAGR growth in operating profits over the last 5 years. Additionally, the company has a high debt to EBITDA ratio of 3.39 times, indicating a potential struggle to pay off its debts.

Another concerning factor is the low interest from domestic mutual funds, who hold only 0% of the company. This could suggest that they are not comfortable with the company's current price or business.

However, there are some positive aspects to consider. Lokesh Machines has declared positive results for the last 3 consecutive quarters, with a 28.41% growth in net sales and a higher PAT of Rs 9.80 cr. The stock is also technically in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, KST, and OBV indicating a bullish trend.

In terms of valuation, the company has a fair ROCE of 7.6 and is currently trading at a discount compared to its historical valuations. Over the past year, the stock has generated a return of 125.62%, outperforming the BSE 500 index. However, its profits have only risen by 61.8%, resulting in a PEG ratio of 1.1.

Despite the recent downgrade, Lokesh Machines has consistently delivered returns over the last 3 years and has outperformed the BSE 500 index in each of the last 3 annual periods. Investors should carefully consider these factors before making any decisions regarding the stock.