MarketsMOJO downgrades L G Balakrishnan & Bros to 'Hold' due to mixed performance
L G Balakrishnan & Bros, a smallcap company in the engineering industry, has recently been downgraded to a 'Hold' by MarketsMOJO on October 1, 2024. This decision was based on various factors such as the company's management efficiency, debt to equity ratio, technical indicators, valuation, and institutional holdings.One of the key reasons for the downgrade is the company's high management efficiency, with a return on equity (ROE) of 15.40%. Additionally, L G Balakrishnan & Bros has a low debt to equity ratio of 0.08 times, indicating a strong financial position.
Technically, the stock is currently in a mildly bullish range, with the Bollinger Band showing a bullish trend since October 1, 2024. Moreover, the company's ROE of 16.2 and attractive valuation with a price to book value of 2.7 make it a fair value compared to its historical valuations.
However, the company's long-term growth has been poor, with net sales growing at an annual rate of only 7.41% over the last 5 years. In the latest quarter, the company's results were flat, with the lowest ROCE (HY) at 20.97% and a decline in profits by 10.2%. This is reflected in the PEG ratio of 1.9, indicating a slow growth potential.
Furthermore, L G Balakrishnan & Bros has underperformed the market in the last 1 year, generating a return of 28.88%, much lower than the market (BSE 500) returns of 39.61%. This could be a cause for concern for investors.
It is worth noting that the company has a high institutional holding of 21.78%, indicating that these investors have better capabilities and resources to analyze the company's fundamentals compared to retail investors.
In conclusion, while L G Balakrishnan & Bros may have some positive aspects such as high management efficiency and a strong financial position, its poor long-term growth and underperformance in the market may be a cause for concern. Investors are advised to hold their positions and monitor the company's performance closely.
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