Synergy Green Industries Downgraded to 'Hold' by MarketsMOJO Due to High Debt Ratio

Synergy Green Industries, a microcap company in the castings/forgings industry, has recently been downgraded to a 'Hold' by MarketsMOJO on October 18, 2024. This decision was based on the company's current performance and future potential.
Despite healthy long-term growth with an annual net sales growth rate of 13.27% and a 199.93% increase in operating profit, the company's stock has been downgraded due to its high debt to EBITDA ratio of 3.08 times. This indicates a low ability to service debt and may pose a risk to the company's financial stability.

However, Synergy Green Industries has declared positive results for the last 6 consecutive quarters, with its highest operating cash flow at Rs 37.69 Cr and return on capital employed at 22.87%. The stock is also trading at a discount compared to its historical valuations and has generated a return of 60.16% in the past year.

On a technical level, the stock is in a mildly bullish range with its MACD and KST technical factors also showing a bullish trend. With a ROCE of 23.3, the company has an attractive valuation with a 6 enterprise value to capital employed. Its consistent returns over the last 3 years and a PEG ratio of 0.5 further support its potential for growth.

However, despite its promising performance, domestic mutual funds hold only 0% of the company, indicating a lack of confidence in the stock. This could be due to the company's small size and the mutual funds' ability to conduct thorough research on companies. This may suggest that the mutual funds are either not comfortable with the current stock price or the business itself.

In conclusion, while Synergy Green Industries has shown positive growth and potential, its high debt to EBITDA ratio and low ability to service debt may have led to its downgrade to a 'Hold'. Investors should carefully consider these factors before making any investment decisions.