Why is Apollo Micro Sys falling/rising?

Short-Term Price Movement and Market Performance

The stock has been under pressure over the past week, registering a sharp decline of 15.30%, significantly underperforming the Sensex, which fell by only 0.52% during the same period. Over the last month, the stock’s fall has been even more pronounced at 18.54%, contrasting with a 1.13% gain in the benchmark index. This recent weakness is further highlighted by the stock’s seven consecutive days of losses, resulting in a cumulative decline of 19.6% during this period.

On 11-Dec, the stock touched an intraday low of ₹219.65, representing a 5% drop from previous levels. The weighted average price for the day indicates that a larger volume of shares traded closer to this low price, signalling selling pressure. Additionally, the stock’s current price remains below its short- and medium-term moving averages, including the 5-day, 20-day, 50-day, and 100-day averages, although it is still above the 200-day moving average. This technical positioning suggests that while the long-term trend remains intact, the near-term momentum is weak.

Investor participation, however, has been rising, with delivery volumes on 10 Dec increasing by 3.42% compared to the five-day average, reaching 14.1 lakh shares. This heightened activity indicates that despite the price decline, there is still considerable interest in the stock, possibly from investors repositioning their holdings.

Strong Long-Term Fundamentals and Financial Performance

Despite the recent price weakness, Apollo Micro Systems Ltd’s long-term fundamentals remain robust. The company has demonstrated exceptional growth over multiple years, with a five-year return exceeding 1686%, vastly outperforming the Sensex’s 83.99% gain over the same period. Even on a three-year basis, the stock has surged by over 761%, compared to the benchmark’s 36.40% increase.

Financially, the company has reported very positive results, with net profit growth of 90.91% and operating profit increasing at an annual rate of 35.76%. The firm has consistently declared positive results for nine consecutive quarters, underscoring its operational strength and resilience. Quarterly profit before tax excluding other income stood at ₹41.85 crore, reflecting a growth rate of 91.36%. Furthermore, operating cash flow for the year reached a peak of ₹11.83 crore, and the operating profit to interest ratio hit a high of 4.70 times, indicating strong coverage of interest expenses and healthy cash generation.

These metrics highlight the company’s solid financial health and its ability to sustain growth, which has translated into market-beating returns. Over the past year, Apollo Micro Systems Ltd’s stock has appreciated by 127.30%, far outpacing the BSE500 index’s modest 0.62% gain.

Liquidity and Trading Considerations

The stock remains sufficiently liquid, with trading volumes supporting a trade size of approximately ₹1.57 crore based on 2% of the five-day average traded value. This liquidity ensures that investors can enter or exit positions without significant price disruption, even amid the current volatility.

While the recent price decline may concern short-term traders, the underlying fundamentals and long-term growth trajectory suggest that the stock’s current weakness could be a temporary correction within a broader upward trend.

Conclusion: Balancing Short-Term Volatility with Long-Term Strength

In summary, Apollo Micro Systems Ltd’s recent share price decline on 11-Dec reflects short-term selling pressure and technical weakness, as evidenced by its underperformance relative to the Sensex and falling below key moving averages. The stock’s seven-day losing streak and intraday lows indicate cautious sentiment among traders in the near term.

However, the company’s impressive financial results, sustained profit growth, and exceptional long-term returns provide a strong foundation for investors to consider. The rising delivery volumes suggest that some market participants may view the current dip as an opportunity rather than a signal to exit. For investors focused on long-term value, Apollo Micro Systems Ltd’s fundamentals remain compelling despite the recent price softness.

As always, investors should weigh the short-term volatility against the company’s growth prospects and market position before making investment decisions.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →