Varroc Engineering receives 'Hold' rating from MarketsMOJO, shows strong performance but concerns remain

Varroc Engineering, a midcap company in the auto ancillary industry, has recently received a 'Hold' rating from MarketsMOJO. This upgrade comes after the company has consistently shown positive results for the last four quarters. In the most recent quarter, the company's PBT LESS OI(Q) has grown by 40.3% to reach Rs 61.82 crore, while its PAT(Q) has reached its highest at Rs 382.69 crore. The EPS(Q) has also seen a significant increase, reaching its highest at Rs 25.05.
Technically, the stock is currently in a bullish range and the technical trend has improved from mildly bullish on 16-May-24. Multiple factors, such as MACD, Bollinger Band, and KST, are also indicating a bullish trend for the stock.

The majority shareholders of Varroc Engineering are its promoters, which is a positive sign for investors. The stock has also outperformed the market (BSE 500) with a return of 86.57% in the last year, compared to the market's return of 34.16%.

However, the company's long-term fundamental strength is weak, with a -15.74% CAGR growth in operating profits over the last 5 years. It also has a high debt to EBITDA ratio of 5.13 times, indicating a low ability to service debt. The return on equity (avg) is also low at 2.91%, indicating low profitability per unit of shareholders' funds.

In terms of valuation, Varroc Engineering has an expensive valuation with a 4.3 enterprise value to capital employed and a PEG ratio of 0.1. However, the stock is currently trading at a discount compared to its average historical valuations.

Overall, while Varroc Engineering has shown strong performance in the past year, its long-term fundamentals and valuation may be a cause for concern. Investors are advised to hold onto their positions for now and monitor the company's performance closely.