Why is Federal-Mogul Go falling/rising?

Stock Performance Against Benchmarks

Despite a slight weekly dip of 2.78%, Federal-Mogul Go has demonstrated impressive gains over longer periods. The stock has appreciated by 6.45% in the past month, significantly outpacing the Sensex’s 1.27% rise. Year-to-date, the stock’s return stands at a remarkable 31.40%, more than triple the Sensex’s 9.68%. Over one year, the stock has delivered a 23.11% gain compared to the Sensex’s 8.43%, and over three years, it has surged 62.17%, well ahead of the benchmark’s 37.12%. These figures underscore the company’s sustained growth and resilience in a competitive market.

Intraday and Technical Insights

On 28-Nov, the stock reached an intraday high of Rs 496.15, outperforming its sector by 5.12%. The weighted average price indicates that more volume was traded near the lower end of the day’s price range, suggesting some cautious profit-taking. Technically, the stock is trading above its 5-day and 200-day moving averages, signalling short-term and long-term strength. However, it remains below its 20-day, 50-day, and 100-day moving averages, indicating some resistance levels that may need to be overcome for sustained upward momentum.

Investor Participation and Liquidity

Investor participation appears to be waning, with delivery volume on 27 Nov falling sharply by 70.52% compared to the five-day average. Despite this decline, the stock maintains adequate liquidity, supporting trade sizes of approximately Rs 0.18 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.

Fundamental Strengths Supporting the Rise

Federal-Mogul Go’s rise is underpinned by solid fundamentals. The company boasts a zero average debt-to-equity ratio, reflecting a conservative capital structure and low financial risk. Operating profit has grown at an impressive annual rate of 59.60%, signalling strong operational efficiency and business expansion. The firm has reported positive results for three consecutive quarters, with operating cash flow for the year reaching a peak of Rs 220.69 crore. Additionally, the return on capital employed (ROCE) for the half-year stands at a robust 19.36%, while cash and cash equivalents have surged to Rs 656.97 crore, highlighting strong liquidity and financial health.

With a return on equity (ROE) of 13.3% and a price-to-book value of 2, the stock is attractively valued relative to its peers and historical averages. The company’s profits have increased by 30.5% over the past year, outpacing the stock’s 23.11% return, resulting in a low PEG ratio of 0.5. This suggests that the stock’s price growth is supported by earnings expansion, making it a fundamentally sound investment.

Market-Beating Returns

Federal-Mogul Go has consistently outperformed the broader market, delivering a 23.11% return over the last year compared to the BSE500’s 5.87%. This superior performance reflects investor confidence in the company’s growth prospects and operational strength, which have been validated by its recent quarterly results and cash flow metrics.

Conclusion

The rise in Federal-Mogul Go’s share price on 28-Nov is a reflection of its strong financial performance, attractive valuation, and consistent market outperformance. While short-term technical indicators suggest some resistance, the company’s robust operating cash flows, low debt, and impressive profit growth provide a solid foundation for investor confidence. Despite a recent dip in delivery volumes, the stock remains liquid and well-positioned within its sector. Investors looking for a fundamentally sound auto components stock with a history of steady growth may find Federal-Mogul Go an appealing option.

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