MarketsMOJO Downgrades Balurghat Technologies to 'Sell' Due to Weak Fundamentals and High Debt

Nov 18 2024 07:31 PM IST

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Balurghat Technologies, a microcap logistics company, has received a 'Sell' rating from MarketsMojo due to weak long-term fundamentals. The company's low ROCE, poor growth, and high debt to EBITDA ratio are some of the reasons for the downgrade. However, the stock has positive technical factors and has shown market-beating performance in the past. Non-institutional investors make up the majority of shareholders, which could lead to higher volatility in the stock price. Investors should carefully consider these factors before making any investment decisions.

Balurghat Technologies, a microcap logistics company, has recently received a 'Sell' rating from MarketsMOJO on November 18, 2024. This downgrade is based on several factors that indicate weak long-term fundamental strength for the company.

One of the main reasons for the 'Sell' rating is the company's average Return on Capital Employed (ROCE) of 9.69%, which is considered low. Additionally, Balurghat Technologies has shown poor long-term growth with only a 1.31% annual growth in Net Sales and a 15.04% growth in Operating profit over the last 5 years.

Another concerning factor is the company's high Debt to EBITDA ratio of 5.05 times, indicating a low ability to service debt. This was reflected in the company's flat results in September 2024, with the lowest Operating Cash Flow of Rs 1.14 crore.

However, there are some positive technical factors for the stock, with it currently being in a Mildly Bullish range and its MACD and KST technical factors also being Bullish. Additionally, with a ROCE of 16, the stock has an attractive valuation with a 2.7 Enterprise value to Capital Employed. It is also currently trading at a discount compared to its average historical valuations.

In terms of performance, Balurghat Technologies has shown market-beating results in both the long-term and near-term. In the last 1 year, the stock has generated a return of 62.82%, while its profits have risen by 50%. This is reflected in the company's low PEG ratio of 0.4.

It is worth noting that the majority of shareholders for Balurghat Technologies are non-institutional investors. This could potentially lead to higher volatility in the stock price.

In conclusion, while Balurghat Technologies has shown strong market-beating performance in the past, the recent downgrade to 'Sell' by MarketsMOJO highlights some concerning factors such as weak long-term fundamentals and high debt. Investors should carefully consider these factors before making any investment decisions.

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