Varroc Engineering: Strong Growth, Positive Outlook

Varroc Engineering, a leading player in the auto ancillary industry, has recently received a 'Hold' rating from MarketsMOJO. The company has shown a remarkable growth in its net profit by 70.34% in the September 2023 quarter, making it a positive sign for investors. This is the third consecutive quarter where Varroc Engineering has declared positive results.
The company's operating cash flow has also been on the rise, with the highest at Rs 660.61 crore. In addition, its operating profit to interest and net sales ratios are also at their highest levels, standing at 3.87 times and 10.30% respectively. These factors contribute to the company's bullish trend in the stock market.

Moreover, Varroc Engineering's technical trend has improved from mildly bullish to a more positive outlook, generating a return of -2.84% since November 2023. The stock is currently trading at a discount compared to its historical valuations, making it an attractive option for investors.

The majority shareholders of Varroc Engineering are its promoters, indicating their confidence in the company's performance. The stock has also outperformed the market (BSE 500) with a return of 85.70% in the last year.

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%, signifying low profitability per unit of shareholders' funds.

In terms of valuation, Varroc Engineering has an expensive ROCE of 14.8 and an enterprise value to capital employed ratio of 4.2. However, its PEG ratio of 0.4 suggests that the stock is undervalued compared to its profits growth.

Overall, Varroc Engineering's recent performance and positive outlook make it a 'Hold' for investors. While the company has shown strong growth in the past year, its long-term fundamentals and valuation should be carefully considered before making any investment decisions.