Stock Performance and Market Context
While Olympic Cards has shown some short-term resilience with a one-week gain of 3.81%, this contrasts sharply with its longer-term performance. Over the past month, the stock has declined by 4.76%, and year-to-date losses stand at a significant 24.05%. This underperformance is stark when compared to the Sensex, which has gained 8.00% year-to-date and 3.53% over the last year. The stock’s three-year return of -9.09% further highlights its struggles, especially against the Sensex’s robust 35.72% gain over the same period.
On the day of the decline, Olympic Cards underperformed its sector by 8.27%, despite trading above its 5-day, 20-day, 50-day, and 100-day moving averages. However, it remains below its 200-day moving average, signalling longer-term weakness. Notably, investor participation has increased, with delivery volumes rising by 36.02% on 9 Dec compared to the five-day average, indicating heightened trading activity amid the price drop.
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Financial Health and Profitability Concerns
Despite a positive note in recent results, where net sales for the latest six months grew by 22.30% to ₹5.21 crores, the company continues to grapple with losses. The quarterly PBDIT, although the highest recorded at ₹-0.29 crores, remains negative, as does the PBT less other income at ₹-1.03 crores. These figures underscore ongoing operational challenges.
More troubling are the company’s financial leverage and debt servicing capabilities. Olympic Cards carries a high debt-equity ratio of 18.67 times, signalling a heavy reliance on borrowed funds. Its debt to EBITDA ratio stands at 13.16 times, reflecting a weak ability to service debt from earnings. This precarious financial position is compounded by negative returns on equity, indicating that the company is not generating shareholder value.
The stock’s risk profile is elevated due to its negative EBITDA and the fact that profits have fallen by 54.3% over the past year. This decline in profitability, coupled with a 7.69% negative return over the last year, contrasts unfavourably with broader market indices and benchmarks such as the BSE500, where Olympic Cards has underperformed consistently over one, three, and five-year horizons.
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Investor Sentiment and Outlook
Investor sentiment appears cautious given the company’s weak fundamentals and high leverage. Although the promoters remain the majority shareholders, the company’s inability to generate positive returns and its risky financial structure have led to a strong sell recommendation from market analysts. The stock’s liquidity is adequate for trading, but the underlying financial risks and consistent underperformance relative to benchmarks weigh heavily on its valuation.
In summary, Olympic Cards’ share price decline on 10-Dec is primarily driven by its high debt burden, negative profitability metrics, and sustained underperformance against market indices. While recent sales growth offers a glimmer of hope, the company’s financial health and risk profile continue to deter investors, resulting in the observed price fall.
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