Shanthi Gears Receives 'Sell' Rating from MarketsMOJO Due to High Valuation and Declining Performance

Shanthi Gears, a leading auto ancillary company, has recently received a 'Sell' rating from MarketsMOJO on November 4, 2024. This downgrade is based on several factors that indicate a potential decline in the stock's performance.
One of the main reasons for the 'Sell' rating is the company's high valuation. With a ROE of 24 and a price to book value of 11.3, the stock is considered to be very expensive. In addition, the stock is currently trading at a premium compared to its historical valuations.

Despite the company's smallcap size, domestic mutual funds hold only 1.61% of the company. This could suggest that they are not comfortable with the current price or the business itself. It is worth noting that domestic mutual funds have the capability to conduct in-depth research on companies, making their small stake even more significant.

On a positive note, Shanthi Gears has a low debt to equity ratio and has shown healthy long-term growth with an annual operating profit growth rate of 30.02%. However, the recent financial results for September 2024 show a decline in profits, with a growth rate of only 20.82%. The company's highest dividend per share and net sales for the quarter are also not enough to offset this decline.

From a technical standpoint, the stock's trend is currently sideways, indicating no clear price momentum. The technical trend has also deteriorated since November 1, 2024, generating a negative return of -1.67%.

In conclusion, based on the current information and analysis, it is recommended to sell Shanthi Gears stock. Investors should consider the high valuation, lack of interest from domestic mutual funds, and recent decline in profits before making any investment decisions.