Recent Price Movement and Market Comparison
On 23 December, Supreme Engineering Ltd’s shares declined by ₹0.03, or 2.48%, closing at ₹1.18. This drop is part of a broader downward trend, with the stock falling 9.23% over the past week, contrasting sharply with the Sensex’s 1.23% gain during the same period. Although the stock posted an 11.32% rise over the last month, this short-term improvement is overshadowed by its long-term underperformance.
Year-to-date, the stock has plunged 55.97%, while the Sensex has advanced by 10.71%. Over the past year, Supreme Engineering Ltd’s shares have declined by 57.40%, in stark contrast to the Sensex’s 10.20% gain. Even over a three-year horizon, the stock’s 7.27% return pales in comparison to the Sensex’s 47.01%, and over five years, the stock has lost 49.46% while the Sensex surged 92.46%. These figures highlight the company’s persistent struggle to keep pace with the broader market.
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Fundamental Weaknesses Weighing on the Stock
Supreme Engineering Ltd’s decline is underpinned by weak long-term fundamentals. The company reports a negative book value, signalling that its liabilities exceed its assets, which is a significant red flag for investors. Over the past five years, net sales have contracted at an annual rate of 28.13%, while operating profit has deteriorated dramatically by 366.31%. Such steep declines in core financial metrics indicate severe operational challenges.
The company carries a high debt burden, with an average debt-to-equity ratio of 2.27 times, reflecting substantial leverage that increases financial risk. Despite this, the average return on equity stands at a modest 7.63%, indicating low profitability relative to shareholders’ funds. This combination of high debt and weak returns undermines investor confidence and contributes to the stock’s poor performance.
Recent Quarterly Performance and Profitability Concerns
Supreme Engineering Ltd has reported negative results for five consecutive quarters, further exacerbating concerns. In the latest half-year period, net sales declined by 38.35% to ₹86.6 million, while net profit plunged 69.04% to a loss of ₹24.21 million. Meanwhile, interest expenses increased by 25.46% to ₹5.95 million, adding to the company’s financial strain. The negative earnings before interest, taxes, depreciation, and amortisation (EBITDA) position highlights ongoing operational losses and cash flow difficulties.
These results have contributed to the stock’s classification as risky, trading below its average historical valuations. Despite a slight 5.8% rise in profits over the past year, the stock’s price has fallen sharply by 57.40%, reflecting market scepticism about the company’s turnaround prospects.
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Liquidity and Shareholding Structure
Liquidity metrics suggest that Supreme Engineering Ltd’s stock is sufficiently liquid for trading, based on 2% of the five-day average traded value. However, the majority of shareholders are non-institutional, which may limit the stock’s appeal to large institutional investors seeking stable ownership structures. This shareholder composition can contribute to volatility and less robust demand for the shares.
Technical indicators show the stock trading above its 20-day and 50-day moving averages but below its 5-day, 100-day, and 200-day moving averages. This mixed technical picture reflects short-term weakness amid longer-term downward momentum.
Conclusion: Why Supreme Engineering Ltd Is Falling
In summary, Supreme Engineering Ltd’s share price decline is driven by a combination of poor financial performance, high leverage, and sustained losses. The company’s negative book value and shrinking sales over the past five years have eroded investor confidence. Despite some recent profit improvements, the persistent negative quarterly results and rising interest costs have weighed heavily on the stock.
Moreover, the stock’s significant underperformance relative to the Sensex and sector benchmarks over multiple time frames underscores its challenges in delivering shareholder value. Until the company can demonstrate a clear turnaround in fundamentals and profitability, the downward pressure on its share price is likely to continue.
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