MarketsMOJO downgrades Metro Brands to 'Sell' due to negative results and expensive valuation

Metro Brands, a largecap company in the consumer durables industry, has recently been downgraded to a 'Sell' by MarketsMOJO on November 13, 2024. This downgrade is based on the company's negative results in September 2024, with a decrease of 32.4% in PAT(Q) and a lowest ROCE(HY) of 17.48%. Additionally, the company's operating profit to interest (Q) ratio is also at its lowest at 7.10 times.
One of the main reasons for the 'Sell' rating is the company's expensive valuation, with a price to book value of 15.9 and a PEG ratio of 3.5. This is significantly higher than its average historical valuations. Furthermore, while the stock has generated a negative return of -8.09% in the past year, its profits have only increased by 21.9%.

In comparison to the market (BSE 500), which has generated a return of 26.05% in the last year, Metro Brands has significantly underperformed with a negative return of -8.09%. This indicates a lack of positive price momentum for the stock.

However, there are some positive factors to consider. The company has a high management efficiency with a ROCE of 23.60% and a strong ability to service debt with a low debt to EBITDA ratio of 0.51 times. Additionally, its operating profit has shown a healthy long-term growth rate of 31.85%.

From a technical standpoint, the stock's trend is currently sideways, indicating no clear price momentum. However, it has improved from sideways on October 29, 2024, and has generated a return of -1.27% since then.

It is worth noting that the majority shareholders of Metro Brands are promoters, and the company has a market cap of Rs 31,329 crore, making it the largest company in the consumer durables sector with a 22.61% share. Its annual sales of Rs 2,380.01 crore also make up 6.99% of the industry.

In conclusion, while Metro Brands may have some positive aspects, the recent downgrade to 'Sell' by MarketsMOJO and its underperformance in the market raise concerns for potential investors. It is important to carefully consider all factors before making any investment decisions.