Tera Software Downgraded to 'Sell' by MarketsMOJO, But Valuation and Performance Remain Strong

Tera Software, a microcap IT software company, has recently been downgraded to a 'Sell' by MarketsMOJO on November 5th, 2024. This downgrade is based on several factors, including weak long-term fundamental strength with an average Return on Capital Employed (ROCE) of 6.58%, poor long-term growth with net sales and operating profit declining at an annual rate of -13.77% and -8.93% respectively over the last 5 years, and a weak ability to service its debt with a poor EBIT to Interest (avg) ratio of 1.39.
In addition, the company's recent results for June 2024 show a flat performance with net sales growing at a negative rate of -41.87%. However, there are some bullish factors for the stock, such as being in a mildly bullish range and having multiple bullish indicators like MACD, Bollinger Band, and KST.

Despite these factors, Tera Software has a very attractive valuation with a ROCE of 5.3 and an enterprise value to capital employed ratio of 0.9. The stock is also currently trading at a discount compared to its average historical valuations. In the past year, the stock has generated a return of 84.30%, while its profits have risen by 34.9%. The PEG ratio of the company is also at a low 0.4.

The majority of shareholders for Tera Software are non-institutional investors. However, the company has shown market-beating performance in both the long-term and near-term, outperforming the BSE 500 index in the last 3 years, 1 year, and 3 months. While the recent downgrade may be a cause for concern, it is important to consider all factors before making any investment decisions.