Zuari Industries Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals and Declining Profits

Zuari Industries, a smallcap trading company, has recently been downgraded to a 'Sell' by MarketsMOJO on September 2, 2024. This decision was based on several factors, including weak long-term fundamental strength with an average Return on Capital Employed (ROCE) of 0.13%, poor long-term growth with only a 3.02% annual growth in Net Sales and 19.06% in Operating profit over the last 5 years, and a high Debt to EBITDA ratio of 118.94 times, indicating a low ability to service debt.
In addition, the company's recent results for June 2024 showed a significant decline in profits, with a PAT (Q) of -33.35 crore, a decrease of -23873.3% compared to the previous quarter. Despite being a smallcap company, Zuari Industries has not attracted much interest from domestic mutual funds, with only 0% of the company's shares being held by them. This could suggest that either the mutual funds are not comfortable with the company's current price or they have not conducted in-depth research on the business.

On a positive note, the stock is currently in a Mildly Bullish range and its MACD and KST technical factors are also Bullish. With a ROCE of 0.4, the stock is considered to have a Very Attractive valuation with a 0.5 Enterprise value to Capital Employed. It is also trading at a discount compared to its average historical valuations. In the past year, the stock has generated a return of 171.84%, while its profits have risen by 165.8%, resulting in a PEG ratio of 0.5.

Furthermore, Zuari Industries 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. However, considering the current factors, MarketsMOJO has downgraded the stock to a 'Sell' and investors should carefully evaluate their options before making any investment decisions.