Raja Bahadur International Downgraded to 'Sell' Due to High Debt and Low Profitability

Raja Bahadur International, a microcap textile company, has recently been downgraded to a 'Sell' by MarketsMOJO on October 1st, 2024. This decision was based on the company's high debt levels, with a debt-to-equity ratio of 11.19 times, indicating weak long-term fundamental strength. Additionally, the company's average debt-to-equity ratio is at a high of 14.32 times, further highlighting its financial struggles.
Furthermore, Raja Bahadur International has a low profitability per unit of total capital, with a return on capital employed (ROCE) of only 2.04%. This is reflected in its expensive valuation, with an enterprise value to capital employed ratio of 2.1. However, the stock is currently trading at a discount compared to its historical valuations.

Despite the company's recent positive results in June 2024, with a higher profit after tax of Rs 0.27 crore and a record ROCE of 7.09%, the stock is still considered to be in a mildly bullish range. Its technical factors, such as MACD and KST, are also currently bullish.

In terms of market performance, Raja Bahadur International has outperformed the BSE 500 index with a return of 95.44% in the last year, compared to the market's return of 39.61%. However, it is important to note that this high return may not be sustainable in the long run, as the company's profits have only increased by 116.7% in the same period, resulting in a PEG ratio of 1.6.

Overall, while Raja Bahadur International has shown some positive results in the past, its high debt levels and low profitability make it a risky investment. Investors should carefully consider these factors before making any decisions regarding this microcap textile company.