Smiths & Founders (India) Receives 'Hold' Rating from MarketsMOJO After Positive Q2 Results

Smiths & Founders (India), a microcap company in the castings/forgings industry, has recently received a 'Hold' rating from MarketsMOJO on September 24, 2024. This upgrade comes after the company reported positive results in the June quarter, with its PBDIT(Q), PBT LESS OI(Q), and PAT(Q) reaching their highest levels at Rs 0.39 cr, Rs 0.28 cr, and Rs 0.31 cr respectively.
The stock is currently in a bullish range and has shown a significant improvement in its technical trend since September 20, 2024, generating a return of 9.93% since then. Multiple factors such as MACD, Bollinger Band, and KST are also indicating a bullish trend for the stock.

Majority shareholders of Smiths & Founders (India) are non-institutional investors, and the company has shown a market-beating performance in both the long term and near term. In the last year, the stock has generated a return of 59.91%, outperforming the BSE 500 index. It has also outperformed the index in the last 3 years, 1 year, and 3 months.

However, the company's long-term fundamental strength is weak, with an average ROCE of 6.15%. Its net sales have only grown at an annual rate of 2.93%, and operating profit at 7.11% over the last 5 years. Additionally, the company's ability to service its debt is also weak, with a poor EBIT to Interest (avg) ratio of 0.23.

The stock is currently trading at a very expensive valuation, with a 3.7 Enterprise value to Capital Employed and a PEG ratio of 0.6. However, it is still at a discount compared to its average historical valuations. While the stock has generated a return of 59.91% in the last year, its profits have only risen by 43%, indicating a PEG ratio of 0.6.

Overall, MarketsMOJO's 'Hold' rating for Smiths & Founders (India) is based on its recent positive results and bullish technical trend, but investors should also consider the company's weak long-term fundamental strength and expensive valuation before making any investment decisions.