Oriental Hotels Downgraded to 'Sell' by MarketsMOJO: Weak Performance and Potential Risks for Investors
Oriental Hotels, a smallcap company in the hotel, resort, and restaurant industry, has recently been downgraded to a 'Sell' by MarketsMOJO on October 23, 2024. This decision was based on several factors that indicate a weak performance and potential risks for investors.One of the main reasons for the downgrade is the company's poor management efficiency, with a low Return on Capital Employed (ROCE) of 5.49%. This signifies a low profitability per unit of total capital, including equity and debt. Additionally, the company's ability to service its debt is weak, with a poor EBIT to Interest ratio of 1.59.
Furthermore, Oriental Hotels has shown poor long-term growth, with a net sales growth rate of only 4.37% over the last 5 years. This, combined with a low ROCE and weak debt-servicing ability, raises concerns about the company's future performance.
In the recent September 2024 quarter, the company reported negative results, with a -62.93% growth in profits and the lowest ROCE of 8.67%. The company's cash and cash equivalents also hit a low of Rs 9.40 crore.
Moreover, with a ROCE of 7.6, the stock is currently trading at an expensive valuation, with a 3.6 Enterprise value to Capital Employed. However, it is worth noting that the stock is currently trading at a discount compared to its average historical valuations.
On a positive note, Oriental Hotels has consistently generated returns over the last 3 years, outperforming the BSE 500 index in each of the last 3 annual periods. Additionally, the stock is currently in a mildly bullish range, with its MACD and KST technical factors also showing a bullish trend.
It is important to mention that the majority shareholders of Oriental Hotels are promoters, which may provide some stability to the company's operations. However, considering the current financial performance and valuation, MarketsMOJO has downgraded the stock to 'Sell' and advises caution for potential investors.
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