Shree Rama Multi-Tech Downgraded to 'Sell' by MarketsMOJO

Shree Rama Multi-Tech, a microcap company in the packaging industry, has recently been downgraded to a 'Sell' by MarketsMOJO on August 22, 2023. This decision was based on several factors, including the company's high debt and weak long-term fundamental strength. Over the past 5 years, the company's net sales have only grown at an annual rate of 9.60%, and it has a high debt to equity ratio of 10.16 times.
In addition, the company's return on capital employed has been low at 2.65%, indicating low profitability per unit of total capital. The latest quarterly results also showed a decline in net sales, with the lowest recorded at Rs 43.77 crore. With a ROCE of 9.7, the stock is currently trading at a very expensive valuation with an enterprise value to capital employed ratio of 4.4.

However, there are some positive factors to consider. The stock is currently in a bullish range and has shown a significant improvement in its technical trend since August 22, 2023, generating a return of 93.82%. Promoters have also shown confidence in the company by increasing their stake by 19.06% in the previous quarter, currently holding 61.57% of the company. This is a positive sign for the future of the business.

Moreover, Shree Rama Multi-Tech has consistently outperformed the BSE 500 index in the last 3 years, generating a return of 217.58% in the past year alone. However, it is important to note that the company's profits have only risen by 867%, resulting in a PEG ratio of 0.1.

In conclusion, while Shree Rama Multi-Tech may have some positive aspects, the company's high debt and weak long-term growth may be cause for concern. Investors should carefully consider all factors before making any investment decisions.