Paramount Communications Receives 'Sell' Rating Amid Weak Fundamentals and High Debt

Paramount Communications, a smallcap company in the cable industry, has recently received a 'Sell' rating from MarketsMOJO on April 2, 2024. This downgrade is based on several factors that indicate weak long-term fundamental strength for the company.
One of the main reasons for the 'Sell' rating is the company's average Return on Capital Employed (ROCE) of 6.78%, which is below the industry average. Additionally, the company has shown poor long-term growth with only a 9.65% annual growth in Net Sales and 3.43% in Operating profit over the last 5 years. This is further compounded by a high Debt to EBITDA ratio of 6.08 times, indicating a low ability to service debt.

Furthermore, the stock is currently trading at a premium compared to its historical valuations, with a 4.3 Enterprise value to Capital Employed. However, it is currently trading at a discount compared to its average historical valuations. In the past year, the stock has generated a high return of 136.79%, but its profits have only risen by 79.8%, resulting in a PEG ratio of 1.2.

Another concerning factor is that 26.52% of the company's promoter shares are pledged, which can put additional downward pressure on the stock prices in falling markets.

On a positive note, the company has declared very positive results for the last 10 consecutive quarters, with a growth in Net Profit of 53.84%. The company also has a strong ROCE (HY) of 12.65%, and its cash and cash equivalents (HY) are at a high of Rs 36.26 crore. Additionally, the company's net sales (Q) are at a high of Rs 284.25 crore.

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

Overall, while Paramount Communications has shown market-beating performance in the past year, the recent downgrade to 'Sell' by MarketsMOJO highlights some concerning factors for the company's long-term growth and financial stability. Investors should carefully consider these factors before making any investment decisions.