MarketsMOJO Downgrades Shalibhadra Finance to 'Sell' Due to Weak Fundamentals and Expensive Valuation

Shalibhadra Finance, a microcap finance company, has recently been downgraded to a 'Sell' by MarketsMOJO on October 14, 2024. This decision was based on several factors, including weak long-term fundamental strength with an average Return on Equity (ROE) of 12.14%, poor long-term growth in net sales and operating profit, and a very expensive valuation with a price to book value of 6.1.
Despite the stock's impressive return of 116.62% in the past year, its profits have only risen by 40.6%, resulting in a high PEG ratio of 3.6. Additionally, the stock is currently trading at a premium compared to its historical valuations.

However, there are some positive aspects to consider. Shalibhadra Finance has declared positive results for the last 11 consecutive quarters, with the highest PAT (Q) at Rs 3.40 crore and a growth of 22.07% in net sales (Q). The company's PBT less OI (Q) has also seen a growth of 35.74%.

From a technical standpoint, the stock is currently in a mildly bullish range, with both the MACD and KST technical factors showing a bullish trend. Furthermore, there has been an increase in participation by institutional investors, who collectively hold 1.05% of the company. These investors have better resources and capabilities to analyze the fundamentals of companies compared to most retail investors.

In the last 3 years, Shalibhadra Finance has consistently outperformed the BSE 500, further highlighting its potential for growth. However, considering the current market conditions and the company's weak long-term fundamentals, MarketsMOJO has downgraded the stock to a 'Sell'. Investors are advised to carefully consider these factors before making any investment decisions.