MarketsMOJO downgrades Infosys to 'Hold' rating due to mixed performance

Infosys, a leading IT software company, has recently been downgraded to a 'Hold' rating by MarketsMOJO on April 30, 2024. This decision was based on various factors, including the company's strong long-term fundamental strength with an average Return on Equity (ROE) of 27.14%, healthy long-term growth with an annual net sales growth rate of 13.20%, and a low Debt to Equity ratio of 0 times.
However, the technical trend for Infosys is currently sideways, indicating no clear price momentum. The stock's technical trend has also deteriorated from Mildly Bullish on April 30, 2024, and has generated a negative return of -0.97% since then.

On the valuation front, Infosys seems to be trading at an attractive price with a Price to Book Value of 6.7, which is lower than its average historical valuations. In the past year, the stock has generated a return of 13.46%, while its profits have only risen by 8.9%, resulting in a PEG ratio of 2.6.

One positive aspect for Infosys is its high institutional holdings at 70.03%, indicating that these investors have better capabilities and resources to analyze the company's fundamentals compared to retail investors. Additionally, their stake in the company has increased by 0.55% over the previous quarter.

With a market cap of Rs 5,95,961 crore, Infosys is the second-largest company in the IT software sector, behind TCS, and constitutes 15.37% of the entire sector. Its annual sales of Rs 153,671 crore account for 18.17% of the industry.

However, the company's recent financial results for March 2024 have been flat, with its ROCE (HY) at its lowest at 37.79%, PBDIT (Q) at Rs 8,784 crore, and operating profit to net sales (Q) at its lowest at 23.16%. This has resulted in Infosys underperforming the market in the last year, with a return of only 13.46%, compared to the market's (BSE 500) return of 36.90%.

Overall, while Infosys has strong fundamentals and a high institutional holding, its technical trend and recent financial results have led to a 'Hold' rating by MarketsMOJO. Investors should carefully consider these factors before making any investment decisions.