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. While the rating was adjusted on 10 Nov 2025, the following analysis uses the latest available data as of 25 January 2026 to provide a clear picture of the stock’s present condition.
Quality Assessment
Currently, Relaxo Footwears holds an average quality grade. This reflects moderate operational efficiency and business fundamentals but also highlights areas of concern. Over the past five years, the company’s operating profit has declined at an annualised rate of -4.33%, signalling challenges in sustaining growth. The latest quarterly results for September 2025 show a 14.77% fall in profit before tax excluding other income, down to ₹36.59 crores, and net sales have contracted by 7.48% to ₹628.54 crores. These figures suggest that the company is facing headwinds in both top-line and bottom-line growth, which weighs on its quality rating.
Valuation Considerations
Relaxo Footwears is currently classified as very expensive in terms of valuation. The stock trades at a price-to-book value of 4.2, 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 profitability. This disparity between valuation and returns raises concerns about the stock’s price sustainability, especially given the recent profit declines and subdued growth prospects.
Financial Trend Analysis
The financial trend for Relaxo Footwears is flat, reflecting stagnation rather than growth. Cash and cash equivalents have dropped to a low of ₹25.22 crores in the half-year period, which may limit the company’s flexibility for expansion or debt servicing. Over the past year, the stock has delivered a negative return of -36.39%, underperforming the BSE500 benchmark consistently over the last three annual periods. Profitability has also deteriorated, with a 3.7% decline in profits over the same timeframe. These trends underscore the challenges the company faces in reversing its financial trajectory.
Technical Outlook
From a technical perspective, the stock is currently bearish. Recent price movements show a downward trend, with the stock declining 2.18% on the latest trading day and falling 11.25% over the past month. The six-month performance is even more pronounced, with a 27.95% drop. This bearish technical grade aligns with the fundamental concerns and valuation risks, signalling that market sentiment remains cautious and that the stock may continue to face selling pressure in the near term.
Summary for Investors
In summary, Relaxo Footwears Ltd’s 'Sell' rating reflects a combination of average quality, very expensive valuation, flat financial trends, and bearish technical indicators. Investors should be aware that the stock has underperformed both in terms of returns and profitability, while trading at a premium valuation. The current rating advises prudence, suggesting that investors may want to consider alternative opportunities or closely monitor the company’s efforts to improve its financial health and market position before committing fresh capital.
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Performance in Context
Relaxo Footwears’ recent performance highlights the challenges it faces in a competitive footwear sector. The stock’s one-year return of -36.39% contrasts sharply with broader market indices, reflecting both company-specific issues and sector headwinds. The flat financial results and declining operating profits suggest that the company has yet to find a clear path to sustainable growth. Investors should weigh these factors carefully against their portfolio objectives and risk tolerance.
Valuation Versus Peers
Despite the negative financial trends, the stock’s valuation remains elevated, which may limit upside potential. The price-to-book ratio of 4.2 is well above typical levels for companies with similar growth and profitability profiles. This premium valuation implies high expectations from the market, which the company has struggled to meet recently. Such a scenario often leads to increased volatility and downside risk if the company fails to improve its fundamentals.
Outlook and Considerations
Looking ahead, investors should monitor key indicators such as operating profit growth, cash flow stability, and any shifts in market sentiment reflected in technical patterns. The current bearish technical grade suggests caution, but any positive developments in earnings or strategic initiatives could alter the outlook. Until then, the 'Sell' rating serves as a prudent guide for investors to reassess their exposure to Relaxo Footwears Ltd.
Conclusion
Relaxo Footwears Ltd’s current 'Sell' rating by MarketsMOJO, last updated on 10 Nov 2025, is supported by a thorough analysis of the company’s quality, valuation, financial trends, and technical outlook as of 25 January 2026. The combination of average quality, expensive valuation, flat financial performance, and bearish technical signals suggests that investors should approach the stock with caution. This rating provides a clear framework for understanding the risks and challenges facing the company in the current market environment.
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