OTCO International Downgraded to 'Sell' by MarketsMOJO, Concerns Over Long-Term Fundamentals and Debt Servicing

OTCO International, a microcap IT software company, has recently been downgraded to a 'Sell' by MarketsMOJO on August 12, 2024. This decision was based on the company's weak long-term fundamental strength, with a 12.60% CAGR growth in operating profits over the last 5 years. Additionally, the company's ability to service its debt is also a concern, with a poor EBIT to Interest (avg) ratio of 0.45.
The company's results for the quarter ending in March 2024 were flat, with the lowest EPS (Q) at Rs 0.00. However, there are some positive factors to consider. The stock is currently in a bullish range and the technical trend has improved from mildly bullish on August 12, 2024. Multiple technical indicators, such as MACD, Bollinger Band, and KST, are also showing bullish signals.

In terms of valuation, OTCO International has a fair ROCE of 0.9 and a 1.8 Enterprise value to Capital Employed. The stock is currently trading at a discount compared to its average historical valuations. However, it is important to note that while the stock has generated a return of 47.07% in the past year, its profits have fallen by -2%.

The majority shareholders of OTCO International are the promoters, which may be a positive factor for investors. Despite the recent downgrade, the stock has still outperformed the market (BSE 500) with a return of 47.07% in the last year, compared to the market's return of 35.35%. Investors should carefully consider all these factors before making any investment decisions regarding OTCO International.