MarketsMOJO Downgrades Vaswani Industries to 'Sell' Due to Weak Performance and High Debt

Vaswani Industries, a microcap company in the steel/sponge iron/pig iron industry, has recently been downgraded to a 'Sell' by MarketsMOJO on 2024-09-23. This decision was based on several factors, including weak long-term fundamental strength with an average Return on Capital Employed (ROCE) of 9.13%, poor long-term growth with net sales growing at an annual rate of 3.81% and operating profit at 10.34% over the last 5 years, and a high debt to EBITDA ratio of 5.72 times, indicating a low ability to service debt.
While the company has declared positive results for the last 3 consecutive quarters, with PAT (HY) at Rs 5.62 crore growing at 43.73% and operating profit to interest (Q) at its highest at 4.83 times, these factors were not enough to outweigh the overall weak performance of the company.

Technically, the stock is in a mildly bullish range with its MACD and KST technical factors also being bullish. However, with an ROE of 7.2, the stock is fairly valued with a price to book value of 1.2. It is also currently trading at a discount compared to its average historical valuations.

While the stock has generated a return of 73.26% over the past year, its profits have only risen by 29.5%, resulting in a PEG ratio of 0.6. The majority shareholders of the company are the promoters, indicating a lack of interest from external investors.

Despite consistent returns over the last 3 years and outperforming BSE 500 in each of the last 3 annual periods, the overall performance and financial health of Vaswani Industries do not seem to be promising. Therefore, MarketsMOJO has downgraded the stock to a 'Sell' and investors are advised to exercise caution before investing in this microcap company in the steel/sponge iron/pig iron industry.