Stock Performance and Market Context
On the day the new high was recorded, Rico Auto Industries experienced an intraday price range between Rs.114.3 and Rs.124.1, with the latter representing a 2.48% rise from the previous close. Despite this peak, the stock underperformed its sector by 2.29% on the same day and saw a slight pullback following three consecutive days of gains. Nevertheless, the stock remains positioned above its key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling a robust upward trend over multiple time horizons.
In comparison, the broader market, represented by the Sensex, opened higher at 86,065.92 points, gaining 0.42% initially, though it later traded slightly lower at 85,861.27 points. The Sensex itself is nearing its own 52-week high, currently just 0.23% shy of the peak at 86,055.86 points. The index has been on a three-week consecutive rise, accumulating a gain of 1.54%, with small-cap stocks leading the charge, as evidenced by the BSE Small Cap index advancing by 0.4% on the day.
Long-Term Growth and Financial Strength
Rico Auto Industries has demonstrated considerable growth over the past year, with its stock price appreciating by 34.15%, significantly outpacing the Sensex’s 7.57% rise during the same period. The stock’s 52-week low was Rs.49.5, highlighting the extent of its upward trajectory.
The company’s financial results underpin this performance. Operating profit has expanded at an annual rate of 66.52%, while net sales have shown a growth rate of 15.44%. These figures correspond with the company’s recent positive quarterly results, marking two consecutive quarters of favourable outcomes. The operating profit to interest ratio stands at a high 5.10 times, indicating a strong capacity to cover interest expenses from operating earnings.
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Valuation and Profitability Metrics
The company’s dividend payout ratio is notable at 31.61%, reflecting a commitment to returning value to shareholders. Its debt-equity ratio is relatively low at 0.92 times, suggesting a conservative approach to leverage. Return on Capital Employed (ROCE) is recorded at 7.9%, while the enterprise value to capital employed ratio stands at 1.6, indicating an attractive valuation relative to the capital invested in the business.
Over the past year, profits have risen by 13.9%, complementing the stock’s price appreciation. The Price/Earnings to Growth (PEG) ratio is 2.7, providing a perspective on the relationship between valuation and earnings growth. Institutional investors have increased their stake by 1.71% over the previous quarter, now collectively holding 3.06% of the company’s shares, signalling a growing institutional presence.
Market Position and Sectoral Context
Operating within the Auto Components & Equipments sector, Rico Auto Industries has outperformed its peers in both the short and long term. The stock has delivered market-beating returns over the last one year, three years, and three months, underscoring its relative strength within the BSE500 index. This performance is supported by the company’s ability to maintain growth in net sales and operating profit, despite a more modest five-year net sales growth rate of 13.31%.
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Risks and Considerations
While the stock’s recent performance is noteworthy, certain financial indicators warrant attention. The company’s Debt to EBITDA ratio is relatively high at 3.38 times, which may affect its ability to service debt efficiently. Additionally, the average Return on Equity (ROE) is 5.64%, indicating a moderate level of profitability relative to shareholders’ funds. These factors suggest areas where the company’s financial profile could be further strengthened.
Summary
Rico Auto Industries’ ascent to a new 52-week high of Rs.124.1 reflects a combination of strong financial results, favourable market trends, and sustained momentum. The stock’s performance over the past year has outpaced broader market indices and sector peers, supported by growth in operating profit and net sales. Despite some financial ratios indicating room for improvement, the company’s valuation metrics and institutional interest highlight its current standing within the Auto Components & Equipments sector.
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