Why is NBI Industrial Finance Company Ltd falling/rising?

Recent Price Performance and Market Comparison

Over the past week, NBI Industrial Finance’s stock has declined by 6.48%, significantly underperforming the Sensex, which gained 1.09% during the same period. The downward trend extends over longer horizons as well, with the stock falling 9.26% in the last month and 9.87% year-to-date, compared to the Sensex’s respective declines of 2.38% and 3.10%. Over the past year, the stock has generated a negative return of 11.33%, while the Sensex has appreciated by 8.91%. Even over three and five years, the stock’s cumulative returns of 28.07% and 21.71% lag behind the Sensex’s 43.47% and 85.71%, respectively. This persistent underperformance highlights investor caution and a lack of confidence relative to broader market indices.

Technical Indicators Signal Weakness

Technically, the stock is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. This broad-based weakness in moving averages typically signals bearish momentum and may discourage short-term traders and investors. Additionally, the stock’s liquidity remains adequate for sizeable trades, but the delivery volume on 29 Jan rose by 54.69% compared to the five-day average, indicating increased investor activity amid the price decline. The stock’s new 52-week low reached ₹1,911 on the day, underscoring the downward pressure.

Fundamental Strengths Amidst Challenges

Despite the recent price weakness, NBI Industrial Finance has reported some impressive fundamental results. The company posted an extraordinary net profit growth of 1808.82% in the quarter ending 25 Dec, supported by its highest-ever quarterly net sales of ₹9.52 crores and PBDIT and PBT less other income both reaching ₹8.72 crores. These figures indicate operational improvements and a positive earnings trajectory over the last two consecutive quarters.

Moreover, the company’s return on equity (ROE) stands at 0.5%, which, while modest, is accompanied by an attractive valuation with a price-to-book value of just 0.2. This suggests that the stock is trading at a significant discount relative to its peers’ historical valuations. The company’s profits have risen by 60.7% over the past year, and its PEG ratio of 1.1 indicates that the stock’s price is somewhat aligned with its earnings growth potential.

Long-Term Concerns and Investor Sentiment

However, the company’s long-term fundamentals remain a concern. Its average ROE over time is a weak 0.30%, which is low for a financial services firm and suggests limited efficiency in generating shareholder returns. This weak fundamental strength is reflected in the stock’s consistent underperformance relative to the BSE500 index over the last three years, one year, and three months. The negative returns and lagging performance metrics have likely contributed to investor caution and selling pressure.

In summary, while NBI Industrial Finance Company Ltd has demonstrated strong recent profit growth and attractive valuation metrics, these positives have not been sufficient to offset concerns about its weak long-term fundamentals and persistent underperformance against market benchmarks. The technical weakness and new 52-week low further compound negative sentiment, resulting in the stock’s decline on 30-Jan.

Investors should weigh the company’s operational improvements against its historical challenges and market trends 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 →