Shri Jagdamba Polymers downgraded to 'Hold' by MarketsMOJO despite positive quarter results

Shri Jagdamba Polymers, a microcap company in the packaging industry, has recently been downgraded to a 'Hold' by MarketsMOJO on September 16, 2024. This decision was based on various factors, including the company's high management efficiency with a ROCE of 39.48% and its strong ability to service debt with a low Debt to EBITDA ratio of 0.31 times.
In addition, the company has shown positive results in the quarter ending June 2024, with its net sales reaching a record high of Rs 121.72 crore and its profits at Rs 9.53 crore. The EPS also saw a significant increase, reaching Rs 10.83. However, despite these positive indicators, the stock is currently in a Mildly Bullish range, with multiple factors such as MACD, Bollinger Band, and KST being bullish.

The majority shareholders of Shri Jagdamba Polymers are the promoters, indicating their confidence in the company's performance. However, the company has shown poor long-term growth, with net sales growing at an annual rate of 13.73% and operating profit at 7.64% over the last 5 years. Additionally, with a ROE of 13.7, the stock is considered to have a very expensive valuation with a 3 Price to Book Value.

Moreover, the stock is currently trading at a premium compared to its average historical valuations. While it has generated a return of 18.77% in the past year, its profits have only risen by 33.3%, resulting in a PEG ratio of 0.6. Furthermore, the stock has underperformed the market in the last year, with a return of 18.77% compared to the market's (BSE 500) return of 34.97%.

In conclusion, while Shri Jagdamba Polymers has shown positive results in the recent quarter and has a strong management efficiency, its long-term growth and expensive valuation may be a cause for concern. Investors are advised to hold onto their stocks and monitor the company's performance closely.