MarketsMOJO downgrades The Hi-Tech Gears to 'Sell' due to weak fundamentals and high debt

The Hi-Tech Gears, a smallcap company in the auto ancillary industry, has recently received a 'Sell' rating from MarketsMOJO on August 26, 2024. This downgrade is based on several factors that indicate weak long-term fundamental strength for the company.

One of the main reasons for the 'Sell' rating is the company's low ability to service debt, with a high Debt to EBITDA ratio of 3.41 times. This indicates that the company may struggle to meet its financial obligations in the future. Additionally, The Hi-Tech Gears has shown a -4.49% CAGR growth in Operating Profits over the last 5 years, further highlighting its weak financial performance.

Furthermore, the company's Return on Equity (avg) stands at 6.32%, which is relatively low and suggests low profitability per unit of shareholders' funds. It is also worth noting that despite its size, domestic mutual funds hold only 0% of the company, which could indicate a lack of confidence in the company's performance.

On a positive note, The Hi-Tech Gears has declared positive results for the last 3 consecutive quarters, with a PAT (HY) growth of 23.63% and a ROCE (HY) of 12.91%. However, these numbers are still relatively low compared to industry standards.

From a technical standpoint, the stock is currently in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, KST, and DOW indicating a bullish trend. However, with a ROCE of 12.5, the stock is fairly valued with a 3 Enterprise value to Capital Employed.

Despite its recent market-beating performance, with a return of 163.77% in the last year, The Hi-Tech Gears' profits have only risen by 67%. This suggests that the stock may be trading at a discount compared to its historical valuations, with a PEG ratio of 0.5.

In conclusion, while The Hi-Tech Gears has shown some positive results in the past few quarters, its weak long-term fundamental strength and low ability to service debt make it a 'Sell' according to MarketsMOJO. Investors should carefully consider these factors before making any investment decisions.