MarketsMOJO Downgrades Zee Learn to 'Sell' Due to Weak Fundamentals and High Valuation

Zee Learn, a microcap company in the educational institutions industry, has recently been downgraded to a 'Sell' by MarketsMOJO on September 12, 2024. This decision was based on several factors that indicate a weak long-term fundamental strength for the company.
One of the main reasons for the downgrade is the company's poor performance in terms of operating profits, with a negative CAGR growth of -159.51% over the last 5 years. Additionally, Zee Learn has a high debt to EBITDA ratio of 5.52 times, indicating a low ability to service its debt. This, coupled with a low return on equity of 8.25%, suggests a lack of profitability per unit of shareholders' funds.

Furthermore, 29.16% of the company's promoter shares are pledged, which can put additional downward pressure on the stock prices in falling markets. However, Zee Learn has declared positive results for the last 3 consecutive quarters, with a significant growth in PBT LESS OI(Q) at Rs 4.46 crore and PAT(HY) at Rs 44.37 crore. The company's ROCE(HY) is also at its highest at 17.39%.

From a technical standpoint, the stock is currently in a mildly bullish range, with both its Bollinger Band and KST technical factors showing a bullish trend. However, with a ROCE of 13.9, the stock is fairly valued with a 1.2 Enterprise value to Capital Employed. It is also trading at a premium compared to its average historical valuations.

Despite generating a return of 68.06% in the last year, which is higher than the market (BSE 500) returns of 36.29%, Zee Learn's profits have only risen by 125.7%. This gives the company a PEG ratio of 0.1, indicating that it may be overvalued. Overall, MarketsMOJO's downgrade to 'Sell' for Zee Learn is based on its weak long-term fundamentals and high valuation compared to its historical averages.