Sambandam Spinning Mills stock downgraded, signals risk

Sambandam Spinning Mills, a microcap textile company, has recently received a stock call upgrade from 'Strong Sell' to 'Sell' by MarketsMOJO on October 16, 2023.
The company's weak long-term fundamental strength has been a major factor in the downgrade, with a -186.14% CAGR growth in operating profits over the last five years. Additionally, Sambandam Spinning Mills has a high debt-to-EBITDA ratio of 5.75 times, indicating a low ability to service its debt. The company's return on equity (avg) has also been low at 5.88%, indicating a low profitability per unit of shareholders' funds.

In the recent quarter, Sambandam Spinning Mills reported flat results with a decline in net sales of -12.9% at Rs 50.82 crore and a negative operating profit of Rs -2.78 crore, which has decreased by -34.13%. The company's return on capital employed (ROCE) for the same period has been the lowest at -1.16%.

The stock is considered risky due to its negative operating profits and is currently trading at a higher valuation compared to its average historical valuations. While the stock has generated a return of 21.34% over the past year, its profits have fallen by -444.4%.

Other factors to consider for Sambandam Spinning Mills include its technical indicators, which are currently in a mildly bullish range. The company's MACD and Bollinger Band technical factors are also bullish. It is worth noting that the majority of the company's shareholders are promoters.

Overall, Sambandam Spinning Mills' stock call upgrade to 'Sell' highlights the company's weak fundamental strength and its risky nature. Investors should carefully consider these factors before making any investment decisions.