Understanding the Current Rating
The Strong Sell rating assigned to Scoobee Day Garments India Ltd indicates a cautious stance for investors, signalling significant concerns about the company’s financial health and market prospects. This rating is derived from a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals. Each of these factors contributes to the overall assessment and helps investors understand the risks involved in holding or acquiring the stock at this time.
Quality Assessment
As of 09 February 2026, Scoobee Day Garments exhibits a below-average quality grade. The company’s long-term fundamental strength is weak, primarily due to its high debt burden. The debt-to-equity ratio stands at an alarming 14.92 times, indicating a heavy reliance on borrowed funds to finance operations. This level of leverage increases financial risk and limits flexibility in adverse market conditions.
Moreover, the company’s growth trajectory has been modest at best. Over the past five years, net sales have grown at an annual rate of 19.13%, which is reasonable for the garments sector, but operating profit has remained stagnant at 0%. This flat profitability trend suggests challenges in converting sales growth into meaningful earnings, raising concerns about operational efficiency and cost management.
Valuation Perspective
Currently, Scoobee Day Garments is considered expensive relative to its financial performance. The company’s return on capital employed (ROCE) is a low 3.2%, while the enterprise value to capital employed ratio stands at 3.6. These metrics imply that investors are paying a premium for capital that is not generating commensurate returns.
Despite the stock trading at a discount compared to its peers’ historical valuations, the valuation remains stretched given the company’s weak profitability and high leverage. The price-to-earnings-to-growth (PEG) ratio is notably high at 9.6, signalling that the market’s expectations for future earnings growth may be overly optimistic in light of current fundamentals.
Financial Trend Analysis
The financial trend for Scoobee Day Garments is largely flat, reflecting limited improvement in key performance indicators. The latest quarterly results ending September 2025 reveal troubling signs: operating cash flow for the year is at its lowest, recorded at a negative ₹4.19 crores. Profit before tax excluding other income has plummeted by 3602.7% compared to the previous four-quarter average, standing at a loss of ₹3.24 crores. Similarly, the quarterly net profit after tax has declined sharply by 787.1%, registering a loss of ₹2.31 crores.
These figures highlight the company’s struggle to generate sustainable profits and cash flows, which is a critical concern for investors seeking stability and growth. Over the past year, the stock has delivered a negative return of 36.35%, underscoring the market’s reaction to these weak financial trends.
Technical Outlook
From a technical standpoint, the stock is mildly bearish. While there have been short-term gains—such as a 19.13% increase over the past week and a 10.81% rise in the last month—these have not translated into a sustained upward trend. The six-month return is negative at -17.97%, and the one-year performance remains deeply negative at -36.35%. This mixed technical picture suggests volatility and uncertainty, which may deter risk-averse investors.
The current technical grade reflects caution, indicating that the stock may face resistance levels and downward pressure unless there is a significant improvement in fundamentals or market sentiment.
Implications for Investors
For investors, the Strong Sell rating serves as a warning to carefully evaluate the risks associated with Scoobee Day Garments India Ltd. The combination of high debt, flat financial trends, expensive valuation, and bearish technical signals suggests that the stock may underperform in the near to medium term.
Investors should consider whether their risk tolerance aligns with the company’s current profile and whether alternative opportunities with stronger fundamentals and more favourable valuations exist within the garments and apparels sector or broader market.
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Sector Context and Market Capitalisation
Scoobee Day Garments operates within the garments and apparels sector, a space characterised by intense competition and evolving consumer preferences. The company’s microcap status further adds to the risk profile, as smaller companies often face liquidity constraints and greater volatility.
In comparison to sector peers, Scoobee Day Garments’ financial and technical metrics lag behind, reinforcing the rationale for the Strong Sell rating. Investors looking for exposure to this sector may find more stable and better-valued opportunities elsewhere.
Summary of Key Metrics as of 09 February 2026
- Mojo Score: 23.0 (Strong Sell grade)
- Debt-Equity Ratio: 14.92 times (high leverage)
- ROCE: 3.2% (low capital efficiency)
- Operating Cash Flow (Yearly): ₹-4.19 crores
- Profit Before Tax (Quarterly): ₹-3.24 crores
- Net Profit After Tax (Quarterly): ₹-2.31 crores
- 1-Year Stock Return: -36.35%
- PEG Ratio: 9.6 (expensive relative to growth)
These figures collectively underpin the current Strong Sell rating and highlight the challenges facing Scoobee Day Garments India Ltd.
Conclusion
In conclusion, Scoobee Day Garments India Ltd’s Strong Sell rating reflects a comprehensive assessment of its current financial health, valuation, and market performance as of 09 February 2026. The company’s high debt levels, flat financial trends, expensive valuation, and bearish technical indicators suggest that investors should approach this stock with caution. While short-term price movements have shown some positive spikes, the overall outlook remains unfavourable.
Investors are advised to monitor the company’s financial developments closely and consider alternative investments with stronger fundamentals and more attractive valuations within the garments and apparels sector or broader market.
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