MarketsMOJO Downgrades Riba Textiles to 'Sell' Due to Weak Fundamentals and High Debt

On September 2, 2024, MarketsMOJO downgraded its stock call on Riba Textiles to 'Sell'. This decision was based on the company's weak long-term fundamental strength, with an average Return on Capital Employed (ROCE) of 7.50%. Additionally, Riba Textiles has shown poor long-term growth, with net sales growing at an annual rate of 7.02% and operating profit at 14.72% over the last 5 years. The company also has a high Debt to EBITDA ratio of 3.97 times, indicating a low ability to service debt.

In the latest quarter, Riba Textiles reported flat results with a PAT (HY) of Rs 3.47 crore, which has seen a decline of 29.33%. These factors contribute to the 'Sell' rating given by MarketsMOJO.

However, there are some positive technical factors to consider. The stock is currently in a Mildly Bullish range, and both the MACD and KST technical indicators are Bullish. Additionally, with an ROCE of 11.3, Riba Textiles has a Very Attractive valuation with a 0.9 Enterprise value to Capital Employed. The stock is also trading at a discount compared to its average historical valuations.

Over the past year, Riba Textiles has generated a return of 53.91%, outperforming the market (BSE 500) returns of 38.49%. However, its profits have only risen by 8%, resulting in a PEG ratio of 1.2. This indicates that the stock may be overvalued.

It is worth noting that the majority shareholders of Riba Textiles are the promoters. This could potentially impact the company's decision-making and performance.

In conclusion, while Riba Textiles has shown market-beating performance in the past year, its weak long-term fundamentals and high debt levels have led to a 'Sell' rating from MarketsMOJO. Investors should carefully consider these factors before making any investment decisions.