Sika Interplant Systems downgraded to 'Hold' by MarketsMOJO, despite strong past performance

Sika Interplant Systems, a smallcap engineering company, has recently been downgraded to a 'Hold' by MarketsMOJO on July 24, 2024. This decision was based on the company's low Debt to Equity ratio, which is currently at 0 times. However, the company has shown strong performance in the past year with a growth in Net Sales of 42.92% and positive results for the last two consecutive quarters.
In addition, Sika Interplant Systems has also shown impressive growth in key financial indicators such as NET SALES(HY) at Rs 63.16 cr, which has grown at 88.59%, and PAT(HY) at Rs 10.79 cr, which has grown at 153.29%. The company's ROCE(HY) is also at its highest at 23.67%.

Technically, the stock is in a Mildly Bullish range and both the MACD and KST technical factors are also Bullish. In the long term, the stock has outperformed BSE 500 and has generated a return of 279.46% in the last year.

However, the company's long term growth has been poor with Net Sales growing at an annual rate of 14.01% and Operating profit at 8.95% over the last 5 years. The stock also has a Very Expensive valuation with a 11.8 Price to Book Value and is trading at a premium compared to its average historical valuations. The PEG ratio of the company is 1.1, indicating that the stock may be overvalued.

It is also worth noting that despite its smallcap size, domestic mutual funds hold only 0% of the company. This could signify that they are not comfortable with the current price or the business, as domestic mutual funds have the capability to conduct in-depth research on companies.

In conclusion, while Sika Interplant Systems has shown strong performance in the past year, its long term growth and valuation may be a cause for concern. Investors may want to hold off on buying the stock until further research is conducted.