Relaxo Footwears Ltd is Rated Sell

Current Rating and Its Significance

The 'Sell' rating assigned to Relaxo Footwears Ltd indicates a cautious stance for investors, suggesting that the stock may underperform relative to the broader market or its sector peers in the near term. This rating is based on a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals. Each of these factors contributes to the overall assessment of the company's investment appeal and risk profile.

Quality Assessment

As of 03 January 2026, Relaxo Footwears holds an average quality grade. This reflects moderate operational efficiency and business fundamentals. However, the company has exhibited poor long-term growth, with operating profit declining at an annualised rate of -4.33% over the past five years. The latest quarterly results ending September 2025 show a 14.77% fall in profit before tax excluding other income, standing at ₹36.59 crores. Net sales also declined by 7.48% to ₹628.54 crores in the same period. These figures highlight challenges in sustaining growth and profitability, which weigh on the quality assessment.

Valuation Considerations

Relaxo Footwears is currently rated as very expensive in terms of valuation. The stock trades at a price-to-book value of 4.8, which is significantly higher than the average valuations of its peers. Despite this premium, the company’s return on equity (ROE) stands at a modest 8.3%, indicating that investors are paying a high price for relatively moderate returns. Over the past year, the stock has delivered a negative return of -36.28%, while profits have declined by 3.7%. This disparity between valuation and financial performance suggests limited upside potential and elevated risk, justifying the cautious rating.

Financial Trend Analysis

The financial trend for Relaxo Footwears is currently flat, signalling stagnation rather than growth. Cash and cash equivalents have dropped to a low of ₹25.22 crores as of the half-year period, which may constrain the company’s ability to invest in expansion or weather economic headwinds. The flat financial grade reflects the lack of positive momentum in key financial metrics, including sales and profitability, which have shown declines in recent quarters. This trend is a critical factor in the 'Sell' rating, as it points to limited near-term improvement prospects.

Technical Outlook

The technical grade for Relaxo Footwears is mildly bearish as of 03 January 2026. The stock’s recent price movements reflect a lack of strong upward momentum, with short-term returns showing a mixed picture: a 0.37% gain over one day and a 0.16% rise over one week, but declines of 0.77% over one month and 9.36% over three months. The one-year return is notably negative at -36.28%, underscoring persistent weakness. This technical backdrop suggests that the stock may face resistance in reversing its downward trend, reinforcing the 'Sell' recommendation.

Performance Relative to Benchmarks

Relaxo Footwears has consistently underperformed the BSE500 benchmark over the last three years. The stock’s one-year return of -36.28% contrasts sharply with broader market gains, highlighting its relative weakness. This underperformance, combined with deteriorating profitability and expensive valuation, signals caution for investors considering exposure to this stock.

Implications for Investors

For investors, the 'Sell' rating on Relaxo Footwears Ltd suggests that the stock may not be an attractive buy at current levels. The combination of average quality, very expensive valuation, flat financial trends, and bearish technical signals points to limited upside and elevated risk. Investors seeking growth or value opportunities in the footwear sector might consider alternative stocks with stronger fundamentals and more favourable valuations.

Summary

In summary, Relaxo Footwears Ltd’s current 'Sell' rating by MarketsMOJO reflects a comprehensive evaluation of its present-day fundamentals and market position as of 03 January 2026. Despite a slight improvement from a previous 'Strong Sell' grade, the stock remains challenged by weak profitability trends, expensive valuation metrics, and subdued technical signals. Investors should carefully weigh these factors when considering their portfolio allocations and remain vigilant for any changes in the company’s financial health or market conditions that could alter its outlook.

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