Why is Goodyear India Ltd falling/rising?

Strong Intraday Performance and Sector Momentum

Goodyear India Ltd opened the trading session with a notable gap up of 13.49%, signalling strong buying interest from the outset. The stock reached an intraday high of ₹920, marking a 16.01% surge before settling at ₹843.70. This wide trading range of ₹90 and an intraday volatility of 5.14% reflect heightened market activity and investor enthusiasm. The stock outperformed its sector, Tyres & Allied, which itself gained 3.04% on the day, underscoring a favourable industry environment that buoyed Goodyear’s shares.

Moreover, the stock has been on an upward trajectory for two consecutive days, delivering a 7.89% return in this short span. This recent momentum contrasts with its year-to-date performance, which remains slightly negative at -0.58%, though still better than the Sensex’s -1.92% over the same period.

Robust Quarterly Financials Bolster Investor Confidence

Underlying the price rally are Goodyear India’s strong quarterly financial metrics. The company reported its highest quarterly PBDIT at ₹42.17 crores and an operating profit to net sales ratio of 6.95%, both indicating operational efficiency. Additionally, profit before tax excluding other income stood at ₹28.74 crores, marking a solid earnings performance that likely reassured investors about the company’s near-term profitability.

Management efficiency is also a positive factor, with a return on equity (ROE) of 16.15%, signalling effective utilisation of shareholder funds. The company’s low debt-to-equity ratio, averaging zero, further enhances its financial stability, reducing risk concerns amid volatile market conditions.

Investor Participation and Liquidity Support Gains

Investor interest in Goodyear India has surged, with delivery volumes on 25 Oct rising by nearly 297% compared to the five-day average. This spike in participation suggests growing conviction among shareholders and traders alike. The stock’s liquidity remains adequate, supporting trades of up to ₹0.01 crore based on 2% of the five-day average traded value, which facilitates smoother price discovery and reduces transaction costs for investors.

Technically, the stock is trading above its 5-day, 20-day, and 50-day moving averages, indicating short- to medium-term bullishness. However, it remains below its 100-day and 200-day averages, reflecting some longer-term resistance levels that investors will watch closely.

Long-Term Challenges Temper Outlook

Despite the recent rally, Goodyear India faces headwinds on the longer-term growth front. Operating profit has declined at an annualised rate of 7.89% over the past five years, signalling structural challenges in expanding profitability. The stock’s one-year return of -9.53% also lags behind the Sensex’s 7.07% gain, highlighting persistent underperformance relative to broader market benchmarks.

Valuation metrics further caution investors. The company’s price-to-book value stands at a relatively expensive 3.4 times, and its price-to-earnings growth (PEG) ratio is 1.5, suggesting that the stock trades at a premium despite mixed growth prospects. This premium valuation may limit upside potential unless the company can sustain profit growth and improve its competitive positioning.

Conclusion: Short-Term Upside Amid Structural Concerns

In summary, Goodyear India Ltd’s share price rise on 06-Feb is primarily driven by strong quarterly earnings, sector-wide gains, and increased investor participation. The stock’s recent outperformance relative to the Tyres & Allied sector and the broader market reflects renewed optimism about its near-term prospects. However, investors should remain mindful of the company’s longer-term growth challenges, premium valuation, and consistent underperformance against benchmarks over the past three years. These factors suggest that while the stock may offer short-term trading opportunities, a cautious approach is warranted for long-term investment decisions.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →