MarketsMOJO Downgrades Orient Beverages to 'Sell' Due to Weak Long-Term Fundamentals

Orient Beverages, a microcap company in the FMCG industry, has recently received a 'Sell' rating from MarketsMOJO on July 1, 2024. This downgrade is due to several factors that indicate a weak long-term fundamental strength for the company.
One of the main reasons for the 'Sell' rating is the high debt of Orient Beverages, with a debt to equity ratio of 2.53 times. This indicates that the company may struggle to meet its financial obligations in the long run. Additionally, the company's operating profit has shown a negative growth rate of -10.20% over the last 5 years, further highlighting its poor long-term growth potential.

Furthermore, Orient Beverages has a low return on equity of 6.77%, indicating a low profitability per unit of shareholders' funds. Its valuation is also considered very expensive, with a ROCE of 0.7 and an enterprise value to capital employed ratio of 1.8.

Despite generating a return of 209.94% in the past year, the company's profits have fallen by -97.9%. This raises concerns about its sustainability in the long run.

On a positive note, Orient Beverages has shown strong results in the first quarter of 2024, with its net sales, profit after tax, and earnings per share reaching their highest levels. The stock is also technically in a mildly bullish range, with its MACD and KST technical factors also indicating a bullish trend.

The majority shareholders of Orient Beverages are its promoters, and the company has consistently outperformed the BSE 500 index in the last 3 years. However, these factors may not be enough to offset the concerns raised by the high debt and weak long-term growth potential of the company.

In conclusion, MarketsMOJO's 'Sell' rating on Orient Beverages is based on its high debt, weak long-term fundamentals, and expensive valuation. Investors should carefully consider these factors before making any investment decisions.