Nikhil Adhesives: A Microcap with Potential Growth

Nikhil Adhesives, a microcap company in the chemicals industry, has recently received a stock call upgrade from 'Strong Sell' to 'Sell' by MarketsMOJO on December 1, 2023. This change in recommendation is based on the company's negative financial results for the past five quarters. The operating cash flow has been on a decline, with the lowest at Rs 20.58 crore, and the profit after tax has also decreased by -37.96% at Rs 6.52 crore. Additionally, the net sales for the company have fallen by -13.0% at Rs 143.81 crore.
With a ROCE of 14.8, Nikhil Adhesives has an expensive valuation with a 3.9 Enterprise value to Capital Employed. 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 -19.32%, its profits have fallen by -41.9%. This underperformance in the market has also been reflected in the stock's underperformance compared to the BSE 500 index, which has generated a return of 16.72% in the same period.

One interesting factor to note is that despite its size, domestic mutual funds hold only 0% of the company. This may suggest that either they are not comfortable with the price or they have not conducted in-depth research on the business. However, Nikhil Adhesives has a strong ability to service debt with a low Debt to EBITDA ratio of 0.88 times.

Technically, the stock is currently in a Mildly Bullish range, with the technical trend improving from Sideways on December 5, 2023, and generating -4.96% returns since then. The Bollinger Band, a key technical factor, has also been Bullish since December 5, 2023.

Overall, while Nikhil Adhesives may have some challenges in its financial performance, its strong ability to service debt and recent technical improvements may provide some positive outlook for the company in the future. However, potential investors should carefully consider all factors before making any investment decisions.