MarketsMOJO Downgrades Sterling & Wilson Renewable Energy to 'Sell' Amidst Weak Fundamentals

Sterling & Wilson Renewable Energy, a midcap engineering company, has recently been downgraded to a 'Sell' by MarketsMOJO on November 4th, 2024. This decision was based on several factors, including weak long-term fundamental strength with a -223.27% CAGR growth in operating profits over the last 5 years. Additionally, the company has a high debt to EBITDA ratio of -1.00 times, indicating a low ability to service debt.
Furthermore, the company has only been able to generate a return on equity of 6.98%, which signifies low profitability per unit of shareholders' funds. Technically, the stock is in a mildly bearish range and has deteriorated from mildly bullish on November 4th, 2024, resulting in a -2.78% return since then. Multiple factors, such as MACD, Bollinger Band, and KST, also indicate a bearish trend for the stock.

With a ROCE of 3, the stock is currently trading at an expensive valuation with a 10.6 enterprise value to capital employed. However, it is trading at a discount compared to its average historical valuations. Despite generating a return of 110.23% in the last year, the company's profits have only risen by 92.4%.

It is also worth noting that 27.15% of the promoter shares are pledged, which can put additional downward pressure on the stock prices in falling markets. On a positive note, the company declared very positive results in September 2024, with a growth in net profit of 77.43%. It has also declared positive results for the last 3 consecutive quarters, with the highest operating cash flow of Rs 1,027.07 crore and ROCE of 7.84%.

Overall, Sterling & Wilson Renewable Energy has shown market-beating performance with a return of 110.23% in the last year, significantly higher than the market (BSE 500) returns of 31.79%. However, considering the recent downgrade and other factors, MarketsMOJO has recommended a 'Sell' for this midcap engineering company. Investors should carefully evaluate all the information and make an informed decision before investing in this stock.