MarketsMOJO Downgrades Rushil Decor to 'Sell' Due to High Debt and Low Profitability

Rushil Decor, a microcap company in the wood and wood products industry, has recently been downgraded to a 'Sell' by MarketsMOJO on October 22, 2024. This decision was based on several factors, including the company's high debt to EBITDA ratio of 6.36 times, indicating a low ability to service debt. Additionally, the company's return on capital employed has been at a low of 8.50%, showing a lack of profitability per unit of total capital.
In terms of recent performance, Rushil Decor's results for June 2024 have been flat, with its PBDIT (profit before depreciation, interest, and taxes) at its lowest at Rs 25.57 crore. Its operating profit to net sales and PBT (profit before tax) less other income have also been at their lowest at 11.44% and Rs 13.11 crore, respectively.

One concerning aspect is that despite its size, domestic mutual funds hold only 0% of the company. This could indicate that they are not comfortable with the company's current price or its business. Furthermore, Rushil Decor has underperformed the BSE 500 index in the last 1 year, 3 years, and 3 months, with a negative return of -9.17%.

The technical trend for the stock is currently sideways, with no clear price momentum. It has also deteriorated from being mildly bullish on October 22, 2024, to generating a negative return of -5.37% since then. However, with a ROCE (return on capital employed) of 10.7, the stock is currently trading at an attractive valuation with a 1.4 enterprise value to capital employed.

Despite this, the stock is currently trading at a discount compared to its average historical valuations. In the past year, while the stock has generated a negative return of -9.17%, its profits have also fallen by -31%. These factors, along with the recent downgrade by MarketsMOJO, suggest that it may be wise to consider selling Rushil Decor stock at this time.