MarketsMOJO Downgrades Hardcastle & Waud Mfg Co to 'Sell' Due to Weak Fundamentals and Expensive Valuation

Hardcastle & Waud Mfg Co, a microcap company in the paints industry, has recently been downgraded to a 'Sell' by MarketsMOJO on August 23, 2024. This decision was based on several factors, including weak long-term fundamental strength, poor 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 CAGR growth in operating profits over the last 5 years, which stands at -1.04%. Additionally, the company's EBIT to Interest ratio is only 0.85, indicating a weak ability to service its debt. Furthermore, the company's Return on Equity (ROE) is only 1.75%, which is considered low and reflects the company's low profitability.

In terms of valuation, Hardcastle & Waud Mfg Co has a very expensive valuation with a price to book value of 1.4. However, the stock is currently trading at a fair value compared to its historical valuations. While the stock has generated a return of 116.97% in the past year, its profits have only risen by 117.2%, resulting in a low PEG ratio of 0.2.

Other factors that contribute to the 'Sell' rating include the company's consistent positive results in the last 4 quarters, with the highest ROCE and PBDIT in the last quarter. Technically, the stock is in a mildly bullish range, with multiple indicators such as MACD, Bollinger Band, KST, and DOW showing bullish signals.

It is worth noting that the majority shareholders of Hardcastle & Waud Mfg Co are the promoters, which may raise concerns about potential conflicts of interest. However, the company has consistently generated returns over the last 3 years and has outperformed the BSE 500 index in each of the last 3 annual periods.

In conclusion, while Hardcastle & Waud Mfg Co may have shown strong returns in the past year, its weak long-term fundamental strength and expensive valuation make it a 'Sell' according to MarketsMOJO. Investors should carefully consider these factors before making any investment decisions.