Southern Infosys Receives 'Sell' Rating, But Positive Factors Offer Potential for Growth

Southern Infosys, a microcap IT software company, has recently received a 'Sell' rating from MarketsMOJO. This downgrade is based on the company's weak long-term fundamental strength, with a -4.17% CAGR growth in operating profits over the last 5 years. Additionally, the company's ability to service its debt is weak, with a poor EBIT to Interest (avg) ratio of -0.19. Furthermore, the company has reported losses, resulting in a negative return on capital employed.
However, there are some positive factors to consider. In the first half of 2024, Southern Infosys reported a growth in net sales of 31.06% and a higher profit after tax of Rs 0.24 crore. Its return on capital employed during this period was also the highest at 5.27%. Technically, the stock is in a mildly bullish range, with its MACD and KST technical factors also showing a bullish trend.

With a return on equity of 4.7%, the stock is fairly valued with a price to book value of 2.2. It is also currently trading at a discount compared to its average historical valuations. In the past year, the stock has outperformed the market, generating a return of 76.06% compared to the BSE 500's return of 38.88%. The company's PEG ratio of 0.1 also indicates that its profits have risen by 20% while the stock has generated a return of 76.06%.

The majority shareholders of Southern Infosys are its promoters, indicating their confidence in the company's future prospects. Despite the recent downgrade, the stock has shown a market-beating performance and has the potential for future growth. Investors should carefully consider all factors before making any investment decisions.