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 September 17, 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 positive results in June 2024, with a higher profit after tax of Rs 0.27 crore and a record high ROCE of 7.09%, the company's stock is still considered a 'Sell' due to its overall financial situation. On a technical level, the stock is in a mildly bullish range, with both the MACD and KST technical factors showing bullish signals.

In terms of market performance, Raja Bahadur International has outperformed the market (BSE 500) with a return of 93.04% in the last year, compared to the market's return of 34.98%. However, this 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.

In conclusion, 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.