Mangalam Drugs and Organics Downgraded to 'Sell' by MarketsMOJO: High Debt and Poor Growth Raise Concerns

Mangalam Drugs and Organics, a microcap pharmaceutical company, has recently been downgraded to a 'Sell' by MarketsMOJO on May 28, 2024. This decision was based on several factors, including the company's high debt to EBITDA ratio of 0 times, indicating a low ability to service debt. Additionally, the company's return on equity has been consistently low at 8.64%, showing a lack of profitability per unit of shareholders' funds.
Furthermore, Mangalam Drugs and Organics has shown poor long-term growth, with net sales growing at an annual rate of only 10.12% and operating profit at 1.43% over the last 5 years. The stock is also currently in a mildly bearish range, with technical trends deteriorating and generating -3.54% returns since May 24, 2024. The Bollinger Band and KST technical factors are also bearish, adding to the negative outlook for the stock.

In addition to these factors, the company has consistently underperformed against the benchmark over the last 3 years, with -4.21% returns in the last 1 year alone. On a positive note, the company did show promising results in March 2024, with the highest operating profit to interest ratio of 2.96 times, highest net sales of Rs 102.24 crore, and highest PBDIT of Rs 11.71 crore.

Despite these positive results, the stock's ROCE of 1.2 and attractive valuation with a 1.1 enterprise value to capital employed, it is still trading at a discount compared to its average historical valuations. Additionally, while the stock has generated a return of -4.21% in the past year, its profits have fallen by -812.6%, indicating a concerning trend.

It is also worth noting that the majority shareholders of Mangalam Drugs and Organics are promoters, which may raise concerns about potential conflicts of interest. Overall, with the recent downgrade to 'Sell' and several concerning factors, investors may want to approach this stock with caution.