Salona Cotspin downgraded to 'Sell' by MarketsMOJO due to financial concerns

Salona Cotspin, a microcap textile company, has recently been downgraded to a 'Sell' by MarketsMOJO on May 15, 2024. This decision was based on several factors, including the company's low ability to service debt with a high Debt to EBITDA ratio of 0 times. Additionally, the company has shown negative results in December 2023, with a decline in PAT(HY) at Rs 3.17 crore and PBT LESS OI(Q) at Rs 1.12 crore. The operating profit to interest ratio is also at its lowest at 1.25 times.
Furthermore, Salona Cotspin has underperformed the market in the last year, with a return of only 16.28%, compared to the market's return of 32.43%. However, there are some positive aspects to the company, such as its high management efficiency with a ROCE of 0% and a healthy long-term growth rate of 38.61% in net sales.

The technical trend for the stock is currently sideways, indicating no clear price momentum. It has also been trading at a discount compared to its average historical valuations, with an attractive valuation of 1.3 Enterprise value to Capital Employed and a ROCE of 8.5. However, despite these positive aspects, the stock's profits have fallen by -46.8% in the past year.

It is worth noting that the majority shareholders of Salona Cotspin are the promoters, which may have influenced the company's management decisions. Overall, with the recent downgrade to 'Sell' and the company's financial performance, investors may want to approach Salona Cotspin with caution.