Recent Price Performance and Market Comparison
Supreme Industries has underperformed significantly against key market benchmarks over multiple time frames. In the last week alone, the stock has declined by 6.41%, contrasting sharply with the Sensex’s modest gain of 0.79%. Over the past month, the stock’s fall deepened to 17.09%, while the Sensex rose by nearly 1%. Year-to-date, Supreme Industries has lost 26.26% of its value, whereas the Sensex has appreciated by 9.08%. This underperformance extends to the one-year horizon, with the stock down 23.59% compared to the Sensex’s 10.47% gain. Despite strong longer-term returns over three and five years, recent trends indicate a clear shift in investor sentiment.
Technical Indicators and Trading Activity
On the technical front, the stock is trading below all major moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling sustained bearish momentum. The share price touched an intraday low of ₹3,467, marking a 2.87% decline during the trading session. Additionally, investor participation appears to be waning, with delivery volumes on 20 Nov falling by 33.74% compared to the five-day average. This reduction in trading activity suggests a cautious stance among market participants, potentially exacerbating price declines.
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Fundamental Strengths Amidst Challenges
Despite the recent price weakness, Supreme Industries maintains several strong fundamental attributes. The company boasts a robust long-term average Return on Equity (ROE) of 22.90%, reflecting efficient capital utilisation. Its net sales have grown at a healthy annual rate of 15.03%, and it carries virtually no debt, with an average debt-to-equity ratio of zero. Institutional investors hold a significant 36.71% stake, indicating confidence from sophisticated market participants. Furthermore, with a market capitalisation of ₹45,299 crore, Supreme Industries is the largest player in its sector, accounting for nearly a quarter of the industry’s market value and generating 15.50% of the sector’s annual sales.
Financial Performance and Valuation Concerns
However, the company’s recent financial results have been disappointing. Supreme Industries has reported negative earnings for five consecutive quarters, with Profit Before Tax (excluding other income) falling by 20.59% to ₹202.09 crore in the latest quarter. Net profit after tax declined by 20.3% to ₹164.74 crore. The debtors turnover ratio, a measure of receivables efficiency, stands at a low 1.91 times for the half-year period, indicating potential challenges in collections. These deteriorating earnings have weighed heavily on investor sentiment.
Valuation metrics also raise caution. The stock trades at a price-to-book value of 7.7, which is considered expensive relative to its peers and historical averages. Its ROE has dropped to 14.8%, signalling a decline in profitability. Over the past year, the stock’s negative return of 23.59% closely mirrors a 22.3% fall in profits, underscoring the link between earnings weakness and share price performance. This has resulted in the stock underperforming the broader market, including the BSE500 index, which has delivered an 8.59% return over the same period.
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Conclusion: Why the Stock is Falling
The decline in Supreme Industries’ share price on 21-Nov and over the preceding week is primarily driven by a combination of disappointing quarterly earnings, expensive valuation, and weakening investor participation. Despite strong long-term fundamentals and a dominant market position, the company’s recent profit declines and negative quarterly results have eroded confidence. The stock’s consistent underperformance relative to the Sensex and sector peers further compounds concerns. Technical indicators confirm a bearish trend, with the stock trading below all key moving averages and experiencing reduced liquidity. These factors collectively explain the downward pressure on Supreme Industries’ shares, signalling caution for investors amid ongoing challenges.
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