Why is Laxmi Cotspin falling/rising?

Stock Performance Against Benchmarks

Over the past week, Laxmi Cotspin’s shares have declined by 2.59%, contrasting sharply with the Sensex’s modest gain of 0.61%. This underperformance extends over longer periods as well, with the stock falling 7.89% in the last month while the Sensex rose by 0.77%. Year-to-date, the stock has plummeted 35.49%, whereas the Sensex has advanced by 10.25%. Over one year, the stock’s return is down 35.25%, compared to the Sensex’s 11.64% gain. Even over three years, Laxmi Cotspin has lagged significantly, delivering a negative 12.41% return against the Sensex’s robust 43.55% growth. Despite this, the five-year return remains positive at 132.23%, slightly outperforming the Sensex’s 102.72% gain, indicating some historical resilience.

Technical and Trading Indicators

On 21-Nov, the stock hit a new 52-week low of ₹20.3, signalling continued downward pressure. It is trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — which typically suggests a bearish trend. Although investor participation has increased, with delivery volume rising nearly 20% on 20-Nov compared to the five-day average, this has not translated into price support. The stock’s liquidity remains adequate for trading, but the lack of upward momentum is evident in its underperformance relative to its sector by 0.41% on the day.

Fundamental Strengths and Valuation

Despite the negative price action, Laxmi Cotspin has demonstrated some positive financial metrics in recent results. The company reported its highest operating cash flow for the year at ₹9.46 crores and a profit after tax of ₹1.12 crores over the latest six months. The half-yearly return on capital employed (ROCE) reached 8.16%, which is a notable improvement. The current ROCE stands at 4.6, and the stock is trading at a very attractive valuation with an enterprise value to capital employed ratio of 0.7, indicating it is undervalued relative to peers. Furthermore, the company’s profits have surged by 263.8% over the past year, even as the stock price declined sharply, resulting in a PEG ratio of zero. Promoters remain the majority shareholders, which often suggests stable ownership.

Weaknesses in Long-Term Fundamentals

However, the company’s long-term fundamentals paint a less favourable picture. The average ROCE over time is a modest 2.31%, reflecting limited efficiency in generating returns from capital. Net sales growth has been sluggish, increasing at an annual rate of only 0.60% over the last five years. Additionally, the company faces challenges in servicing its debt, with a high Debt to EBITDA ratio of 5.51 times, signalling elevated financial risk. These factors contribute to the stock’s poor performance relative to broader market indices and sector benchmarks over multiple time horizons.

Conclusion: Why the Stock is Falling

Laxmi Cotspin’s recent share price decline is primarily driven by its weak long-term growth prospects, poor debt servicing capacity, and sustained underperformance against key market benchmarks such as the Sensex and BSE500. Although the company has shown some improvement in profitability and cash flow in the short term, these positives have not been sufficient to offset investor concerns about its fundamental weaknesses and technical downtrend. The stock’s position below all major moving averages and its new 52-week low reinforce the bearish sentiment prevailing among market participants. Investors appear cautious, reflecting the company’s inability to deliver consistent growth and returns relative to its peers and the broader market.

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