S.M. Gold downgraded to 'Sell' by MarketsMOJO due to weak financials and high debt

S.M. Gold, a microcap company in the diamond and gold jewellery industry, has recently been downgraded to a 'Sell' by MarketsMOJO on October 1st, 2024. This decision was based on several factors, including the company's weak long-term fundamental strength due to operating losses and poor growth in operating profit over the last 5 years. Additionally, S.M. Gold has a high debt to EBITDA ratio, indicating a low ability to service debt.
In the most recent quarter, the company's results were flat with a PBDIT(Q) of -0.20 cr. and an operating profit to net sales (Q) of -0.86%. The EPS(Q) was also at its lowest at Rs -0.35. These numbers suggest a struggling financial performance for S.M. Gold.

However, there are some bullish factors for the stock, such as being in a mildly bullish range and having multiple indicators like MACD, Bollinger Band, and KST showing positive signs. Additionally, with a ROCE of 6.1, the stock has a very attractive valuation with a 1.5 enterprise value to capital employed. It is also currently trading at a discount compared to its historical valuations.

Despite its recent downgrade, S.M. Gold has shown market-beating performance with a return of 129.86% in the last year, significantly higher than the market (BSE 500) returns of 39.61%. However, it is important to note that while the stock has seen a significant increase in returns, its profits have actually fallen by -8.1% in the same period.

In conclusion, while S.M. Gold may have some positive indicators, its overall financial performance and high debt to EBITDA ratio suggest caution for potential investors. It is important to carefully consider all factors before making any investment decisions.