Supertex Industries Downgraded to 'Sell' by MarketsMOJO, Technical Trend Remains Sideways

Supertex Industries, a microcap textile company, has recently been downgraded to a 'Sell' by MarketsMOJO on May 7, 2024. This decision was based on several factors, including weak long-term fundamental strength with a -4.42% CAGR growth in net sales over the last 5 years. Additionally, the company has a high debt to EBITDA ratio of 5.84 times, indicating a low ability to service debt. Furthermore, the company has only been able to generate a low return on equity of 1.57%, showing low profitability per unit of shareholders' funds.
In the past year, Supertex Industries has underperformed the market, with negative returns of -8.18% compared to the market's 34.08% returns. This trend is expected to continue as the technical trend is currently sideways, with no clear price momentum. The stock's technical trend has deteriorated since May 7, 2024, and has generated -3.61% returns since then. The Bollinger Band, a key technical factor, has also been sideways since May 7, 2024.

However, there have been some positive results for the company in December 2023, with a higher PAT of Rs 0.11 crore and a 58.79% growth in net sales. The operating profit to net sales ratio is also at its highest at 11.54%. Despite these positive results, the stock's technical trend and underperformance in the market suggest caution for potential investors.

On the valuation front, Supertex Industries has a very attractive ROCE of 4.1 and a low enterprise value to capital employed ratio of 0.7. This indicates that the stock is currently trading at a discount compared to its average historical valuations. Additionally, the company's profits have risen by 78% in the past year, while the stock has generated negative returns of -8.18%. This results in a PEG ratio of 0, further supporting the stock's attractive valuation.

It is worth noting that the majority of shareholders in Supertex Industries are non-institutional investors. This may suggest a lack of confidence in the company's performance and future potential. Overall, with a 'Sell' rating from MarketsMOJO and a sideways technical trend, it may be wise for investors to approach Supertex Industries with caution.