Why is Healthcare Global Enterprises Ltd falling/rising?

Recent Price Performance and Market Context

The stock has experienced a notable downturn over the past week, shedding 5.01% compared to a marginal 0.13% gain in the Sensex during the same period. This decline extends a four-day losing streak, with the share price touching an intraday low of ₹663.8, down 2.15% on the day. Over the last month, the stock has fallen 8.06%, underperforming the broader market which declined by only 0.66%. Despite these short-term setbacks, the stock has delivered impressive returns over longer horizons, with a 41.95% gain in the past year and a remarkable 306.06% rise over five years, significantly outpacing the Sensex’s 81.04% gain in that timeframe.

Technical Indicators and Trading Activity

From a technical standpoint, Healthcare Global’s share price remains above its 200-day moving average, signalling underlying long-term strength. However, it currently trades below its 5-day, 20-day, 50-day, and 100-day moving averages, indicating short-term weakness and potential resistance levels. Investor participation has increased recently, with delivery volumes rising by 15.01% on 24 Dec to 1.12 lakh shares, suggesting heightened trading interest despite the price decline. Liquidity remains adequate, supporting trades up to ₹0.23 crore without significant market impact.

Fundamental Strengths and Challenges

Healthcare Global Enterprises Ltd boasts a robust long-term growth profile, with operating profit expanding at an annualised rate of 54.75%. This strong operational performance underpins the company’s attractive valuation metrics, including a return on capital employed (ROCE) of 7.6 and an enterprise value to capital employed ratio of 4.4. These figures suggest the stock is trading at a discount relative to its peers’ historical valuations, offering potential value for investors.

However, the company faces challenges as well. Despite the stock’s impressive 41.95% return over the past year, its profits have declined by 34.3% during the same period. This divergence between share price appreciation and profit contraction may be contributing to recent investor caution and the short-term price decline. The mixed signals from earnings performance could be prompting some profit-taking or revaluation by market participants.

Promoter Confidence and Long-Term Outlook

Adding a positive note, promoters have increased their stake by 1.32% in the previous quarter, now holding 63.78% of the company. This rise in promoter shareholding is often interpreted as a sign of confidence in the company’s future prospects. Furthermore, the stock has consistently outperformed the BSE500 index over the last three annual periods, reinforcing its credentials as a strong long-term investment.

Conclusion: Balancing Short-Term Pressure with Long-Term Potential

The recent decline in Healthcare Global Enterprises Ltd’s share price reflects short-term market pressures and profit concerns, despite the company’s strong long-term growth and attractive valuation. The stock’s underperformance relative to the Sensex and its sector over the past week and month suggests investors are cautious amid falling profits and technical resistance. Nevertheless, rising promoter confidence and consistent outperformance over multiple years provide a foundation for potential recovery and sustained value creation. Investors should weigh these factors carefully, considering both the current headwinds and the company’s demonstrated ability to generate substantial returns over time.

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 →