Shiva Texyarn Faces Challenges Amidst Recent Profit Growth and High Debt Levels

Shiva Texyarn, a microcap player in the textile industry, has recently come under scrutiny due to its financial performance metrics. Over the past five years, the company has experienced a significant decline in operating profits, with a compound annual growth rate (CAGR) of -171.20%. This troubling trend raises concerns about its long-term fundamental strength.
The company's ability to manage its debt is also a point of concern, as indicated by a high Debt to EBITDA ratio of 5.06 times. Additionally, Shiva Texyarn has reported an average Return on Equity (ROE) of 6.27%, reflecting low profitability relative to shareholders' funds. The Return on Capital Employed (ROCE) stands at a mere 2.1, suggesting an expensive valuation with an enterprise value to capital employed ratio of 1.7.

Despite these challenges, the company has shown some positive results in its latest quarterly report, with a profit after tax of Rs 2.77 crore, marking a remarkable growth of 415.7%. Net sales also increased by 24.5% to Rs 95.19 crore. Over the past year, the stock has delivered a return of 61.91%, significantly outperforming the broader market, which saw returns of 16.96%.