Steel Exchange India Downgraded to 'Sell' by MarketsMOJO Due to High Debt and Weak Fundamentals

Steel Exchange India, a smallcap company in the iron and steel industry, has recently been downgraded to a 'Sell' by MarketsMOJO on 2024-06-19. This decision was based on several factors, including the company's high debt and weak long-term fundamental strength. Over the last 5 years, the company's net sales have only grown at an annual rate of 1.24%, and it has a high debt to equity ratio of 3.77 times. Additionally, the company has a low profitability per unit of total capital, with a return on capital employed of only 6.30%.
One concerning aspect of Steel Exchange India is that 62.38% of its promoter shares are pledged. This means that in falling markets, there is additional downward pressure on the stock prices. In fact, while the market (BSE 500) has generated returns of 36.98% in the last year, the stock has underperformed significantly with negative returns of -14.42%.

On a positive note, the company declared very positive results in March 2024, with a growth in net profit of 9304.76%. It also has a high operating profit to interest ratio and has seen significant growth in its PAT and PBT. However, the technical trend for the stock is currently sideways, indicating no clear price momentum.

Despite its recent underperformance, Steel Exchange India has an attractive valuation with a ROCE of 7.3 and an enterprise value to capital employed ratio of 1.8. It is also trading at a discount compared to its average historical valuations. While the stock has generated negative returns in the past year, its profits have actually risen by 118.5%, resulting in a PEG ratio of 1.2. Overall, MarketsMOJO's downgrade to 'Sell' for Steel Exchange India is based on its current financial and market performance, and investors should carefully consider these factors before making any investment decisions.