Sterling & Wilson Renewable Energy: Strong Results and Bullish Trend, But Fundamental Weakness and Pledged Shares Raise Concerns

Sterling & Wilson Renewable Energy, a midcap engineering company, has recently caught the attention of investors and analysts. MarketsMOJO has upgraded its stock call to 'Hold' on October 17, 2024.
The company has shown a significant growth in net profit of 77.43% and has declared positive results for the last three consecutive quarters. Its operating cash flow has also been the highest at Rs 1,027.07 crore and its return on capital employed (ROCE) is at a high of 7.84%. Additionally, its net sales have grown at a rate of 20.0%.

Technically, the stock is in a mildly bullish range and has shown a positive trend since October 8, 2024, with a return of 15.89%. The MACD and KST technical factors also indicate a bullish trend.

In terms of market performance, the stock has outperformed the market (BSE 500) with a return of 121.28% in the last year.

However, the company's long-term fundamental strength is weak with a -223.27% CAGR growth in operating profits over the last five years. It also has a high debt to EBITDA ratio of -1.00 times, indicating a low ability to service debt. The return on equity (avg) is at 6.98%, which is relatively low compared to its peers.

The stock is currently trading at an expensive valuation with an enterprise value to capital employed of 11.1. However, it is still at a discount compared to its average historical valuations.

It is worth noting that while the stock has shown a return of 121.28% in the last year, its profits have only risen by 92.4%.

Another concern for investors is that 34.88% of promoter shares are pledged, which could put additional downward pressure on the stock prices in falling markets.

Overall, Sterling & Wilson Renewable Energy has shown positive results in the recent quarters and has a bullish technical trend. However, its long-term fundamental strength and high promoter pledged shares should be considered by investors before making any investment decisions.