Nirlon receives 'Hold' rating after positive results, institutional interest and bullish trend

Nirlon, a smallcap company in the miscellaneous industry, has recently received a 'Hold' rating from MarketsMOJO. This upgrade comes after the company reported positive results in June 2024, with its ROCE (HY) reaching a high of 27.99% and net sales (Q) at Rs 156.51 crore. Additionally, the company's operating profit to interest (Q) ratio also reached a high of 4.05 times.
Technically, the stock is currently in a mildly bullish range, with its trend improving from sideways on 14-Aug-24. The Bollinger Band and DOW technical factors also indicate a mildly bullish trend.

Institutional investors have also shown increased interest in Nirlon, with their stake in the company increasing by 0.89% over the previous quarter. These investors have better resources and capabilities to analyze the fundamentals of companies, making their participation a positive sign for Nirlon.

However, Nirlon is a high debt company with a debt to equity ratio (avg) of 2.26 times. Its long-term growth has also been poor, with net sales growing at an annual rate of 15.11% and operating profit at 19.13% over the last 5 years.

With a ROCE of 28.9, Nirlon's valuation is considered very expensive with a 3.4 enterprise value to capital employed. However, 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 3.74%, its profits have only risen by 6.3%, resulting in a PEG ratio of 2.4. On the positive side, the company offers a high dividend yield of 6.1%.

In the last year, Nirlon has underperformed the market, with a return of 3.74% compared to the market (BSE 500) return of 37.46%. Overall, while the company has shown positive results in the recent quarter, its high debt and poor long-term growth may be a cause for concern for investors.