MarketsMOJO Downgrades MPDL Stock to 'Sell' Due to Weak Fundamentals

On April 25, 2024, MarketsMOJO downgraded its stock call on MPDL, a microcap company in the sugar industry, to 'Sell'. This decision was based on several factors that indicate a weak long-term fundamental strength for the company.

One of the main reasons for the downgrade is the company's consistent operating losses. Over the past 5 years, its operating profit has only grown at an annual rate of -2.20%, indicating poor long-term growth potential. Additionally, MPDL has a high debt to EBITDA ratio of -1.00 times, which suggests a low ability to service its debt.

Furthermore, with a ROCE of -0.2, the company's valuation is considered very expensive with an enterprise value to capital employed ratio of 0.5. This means that the stock is trading at a premium compared to its historical valuations.

Despite the stock's impressive return of 148.96% in the past year, its profits have only increased by 426.4%. This indicates that the stock may be overvalued and not sustainable in the long run.

On a positive note, MPDL did show some promising results in December 2023, with a higher PAT (HY) of Rs 23.15 crore. However, this was not enough to outweigh the other factors that led to the 'Sell' rating.

From a technical standpoint, the stock is currently in a mildly bullish range, with indicators such as MACD, Bollinger Band, KST, and OBV all pointing towards a bullish trend.

It is worth noting that the majority shareholders of MPDL are promoters, which could potentially impact the company's decision-making and performance.

Overall, MPDL's stock has outperformed the market (BSE 500) in the past year, but with the recent downgrade and other factors indicating a weak long-term outlook, investors may want to approach with caution.