Scoobee Day Garments India Ltd is Rated Strong Sell

Rating Overview and Context

On 02 September 2025, MarketsMOJO revised the rating of Scoobee Day Garments India Ltd from 'Sell' to 'Strong Sell', reflecting a significant change in the company's outlook. The Mojo Score dropped sharply by 14 points, from 31 to 17, signalling heightened concerns about the stock's prospects. This rating is a clear indication that the stock is currently viewed as a high-risk investment with limited potential for positive returns in the near term.

It is important to note that while the rating change occurred in early September, the analysis below is based on the most recent data available as of 25 December 2025. This ensures investors receive an up-to-date picture of the company's financial health, market performance, and valuation.

Here’s How Scoobee Day Garments Looks Today

As of 25 December 2025, Scoobee Day Garments India Ltd remains a microcap player in the Garments & Apparels sector, with a Mojo Grade firmly in the 'Strong Sell' category. The stock has experienced a challenging year, delivering a negative return of -40.10% over the past 12 months and a year-to-date decline of -42.28%. This underperformance extends beyond the short term, with the stock lagging behind the BSE500 benchmark over the last three years, one year, and three months.

The daily price movement on the latest trading day showed a decline of -1.23%, continuing the bearish trend observed in recent months. Over the past six months, the stock has fallen by -23.03%, and the three-month return stands at -9.10%, underscoring persistent downward pressure.

Quality Assessment

The quality grade assigned to Scoobee Day Garments is below average, reflecting several fundamental weaknesses. The company carries a notably high debt burden, with a debt-to-equity ratio averaging 14.92 times, which is exceptionally elevated for a microcap firm. This level of leverage raises concerns about financial stability and the ability to service debt obligations, especially in a volatile market environment.

Long-term growth prospects appear subdued. Over the last five years, net sales have grown at an annualised rate of 19.13%, which is moderate, but operating profit has stagnated at 0% growth, indicating operational inefficiencies or margin pressures. The company’s operating cash flow for the year ending September 2025 was negative at ₹4.19 crores, signalling cash generation challenges.

Valuation Considerations

Despite the weak fundamentals, the stock is considered expensive relative to its capital employed. The return on capital employed (ROCE) stands at a low 3.2%, while the enterprise value to capital employed ratio is 3.4, suggesting that investors are paying a premium for limited returns. The price-to-earnings-to-growth (PEG) ratio is elevated at 8.9, which typically indicates overvaluation when compared to growth prospects.

However, it is worth noting that the stock currently trades at a discount compared to its peers’ historical valuations, which may reflect the market’s cautious stance given the company’s financial and operational challenges.

Financial Trend and Profitability

The financial trend for Scoobee Day Garments is flat, with recent quarterly results showing significant deterioration. The profit before tax excluding other income (PBT less OI) for the latest quarter was a loss of ₹3.24 crores, a dramatic fall of 3602.7% compared to the previous four-quarter average. Similarly, the net profit after tax (PAT) for the quarter was a loss of ₹2.31 crores, down 787.1% from the prior average.

Despite these losses, the company’s profits have risen by 34% over the past year, a somewhat contradictory signal that may be attributed to non-operational factors or one-off items. This inconsistency adds to the uncertainty surrounding the stock’s near-term outlook.

Technical Analysis

The technical grade for Scoobee Day Garments is bearish, reflecting the stock’s downward momentum and weak price action. The persistent negative returns over multiple time frames and the recent daily decline reinforce the technical outlook. Investors relying on chart-based signals would likely view the stock as unattractive for entry at present.

Implications for Investors

The 'Strong Sell' rating from MarketsMOJO indicates that investors should exercise caution with Scoobee Day Garments India Ltd. The combination of high leverage, flat financial trends, expensive valuation metrics, and bearish technical signals suggests limited upside potential and elevated risk. For risk-averse investors, this rating serves as a warning to avoid or exit positions in the stock until there is clear evidence of operational turnaround and financial improvement.

Conversely, speculative investors might monitor the stock for any signs of stabilisation or value opportunities, but the current data advises prudence.

Summary

Scoobee Day Garments India Ltd’s current 'Strong Sell' rating reflects a convergence of negative factors. The company’s below-average quality, expensive valuation relative to returns, flat financial trends, and bearish technical outlook collectively justify this cautious stance. Investors should be aware that the stock has underperformed significantly over the past year and continues to face operational and financial headwinds.

While the rating was updated on 02 September 2025, the analysis based on data as of 25 December 2025 confirms that the company has yet to demonstrate meaningful improvement. As such, the stock remains a high-risk proposition in the Garments & Apparels sector, and investors should carefully consider their risk tolerance before exposure.

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