MarketsMOJO upgrades Amarjothi Spinning Mills to 'Hold' rating due to strong debt management and attractive valuation

Amarjothi Spinning Mills, a microcap textile company, has recently received a 'Hold' rating from MarketsMOJO. This upgrade is based on the company's strong ability to service debt, with a low Debt to EBITDA ratio of 1.12 times. The stock is also currently in a Mildly Bullish range, with the technical trend improving from Mildly Bearish on 01-Apr-24. Additionally, the Bollinger Band, a key technical factor, has been Bullish since 01 Apr 2024.
One of the main reasons for the 'Hold' rating is the company's attractive valuation, with a ROCE of 8.8 and an Enterprise value to Capital Employed ratio of 0.7. This indicates that the stock is trading at a discount compared to its average historical valuations. However, over the past year, the stock has only generated a return of 1.28%, while its profits have fallen by -4.4%.

The majority shareholders of Amarjothi Spinning Mills are the promoters, indicating their confidence in the company. However, the company has shown poor long-term growth, with Net Sales growing at an annual rate of -0.44% and Operating profit at -3.76% over the last 5 years. In the latest quarter, the company's results were flat, with NET SALES(9M) at Rs 120.15 cr, showing a growth of -20.63%.

In the last 1 year, the stock has underperformed the market, generating a return of only 1.28%, compared to the market (BSE 500) returns of 39.87%. While the company's financials may not be very promising, the 'Hold' rating suggests that it may be a good idea to hold onto the stock for now and wait for potential improvements in the future.