Machino Plastics Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals

Machino Plastics, a microcap company in the auto ancillary industry, has recently been downgraded to a 'Sell' by MarketsMOJO. This decision is 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 fundamental strength. Over the last 5 years, Machino Plastics has only seen a 53.08% CAGR growth in operating profits, which is significantly lower than the industry average. Additionally, the company has a high debt to EBITDA ratio of 4.71 times, indicating a low ability to service debt.

Furthermore, the company's profitability per unit of shareholders funds is also low, with a Return on Equity (avg) of only 1.98%. This suggests that the company is not generating enough profits for its shareholders.

On the positive side, Machino Plastics has declared positive results for the last 3 consecutive quarters, with its highest net sales, PBDIT, and PBT LESS OI in the last quarter. However, the technical trend for the stock is currently sideways, with no clear price momentum. The stock has also seen a deterioration in its technical trend since 08-Oct-24, generating only 4.03% returns since then.

Despite its current performance, Machino Plastics has a very attractive valuation with a ROCE of 8.3 and a 1.6 Enterprise value to Capital Employed. The stock is also trading at a discount compared to its average historical valuations. However, the company's profits have only risen by 224.8% in the past year, while the stock has generated a return of 42.73%. This gives the company a PEG ratio of 0.2, which is considered low.

In the last 3 years, Machino Plastics has consistently outperformed the BSE 500, generating 42.73% returns in the last year alone. However, with the recent downgrade by MarketsMOJO, investors may want to carefully consider their options before investing in this microcap company in the auto ancillary industry.