Milkfood Receives 'Sell' Rating from MarketsMOJO Due to Weak Long-Term Outlook

Milkfood, a microcap company in the FMCG industry, has recently received a 'Sell' rating from MarketsMOJO on August 22, 2024. This downgrade is based on several factors that indicate a weak long-term outlook for the company.
One of the main reasons for the 'Sell' rating is the company's weak fundamental strength. Over the past 5 years, Milkfood has only seen a -4.50% CAGR growth in operating profits. Additionally, the company has a high debt to EBITDA ratio of 3.64 times, indicating a low ability to service its debt. This is further supported by a low return on equity of 5.77%, showing a lack of profitability per unit of shareholders' funds.

Furthermore, the stock is currently trading at a premium compared to its historical valuations, with an expensive valuation of 1.8 enterprise value to capital employed. Despite this, the stock is currently trading at a discount compared to its average historical valuations. In the past year, while the stock has generated a return of 16.38%, its profits have actually fallen by -8%, underperforming the market (BSE 500) returns of 37.99%.

On a positive note, Milkfood has shown some growth in its recent results. In June 2024, the company's PAT (HY) has grown by 165.91%, PBT LESS OI (Q) has grown by 118.02%, and its operating cash flow (Y) has reached a high of Rs 20.34 crore.

From a technical standpoint, the stock is currently in a mildly bullish range, with multiple factors such as MACD, KST, and DOW indicating a bullish trend.

Moreover, there has been a rise in promoter confidence, with promoters increasing their stake in the company by 8.28% in the previous quarter and currently holding 56.03% of the company. This increase in stake is a positive sign of high confidence in the future of the business.

In conclusion, while Milkfood may have shown some growth in its recent results and has seen a rise in promoter confidence, the overall weak fundamental strength and expensive valuation make it a 'Sell' according to MarketsMOJO. Investors should carefully consider these factors before making any investment decisions.