Recent Price Movement and Market Performance
Tata Elxsi’s share price has been on a downward trend for the past three consecutive days, accumulating a loss of 6.78% during this period. The stock’s intraday low on 10-Dec touched ₹4,855.2, marking a 2.5% decline within the trading session. This underperformance extends beyond daily fluctuations, as the stock has underperformed its sector by 1.6% on the day and lagged behind the broader Sensex index over multiple time frames.
Over the past week, Tata Elxsi’s stock has fallen by 6.07%, significantly underperforming the Sensex’s modest decline of 0.84%. The one-month performance shows a similar pattern, with the stock down 6.65% while the Sensex gained 1.02%. Year-to-date, the stock has plummeted 28.64%, contrasting sharply with the Sensex’s 8.00% gain. Over the last year, the stock’s decline deepens to 34.19%, whereas the Sensex rose by 3.53%. Even on a three-year horizon, Tata Elxsi’s returns have been negative at -27.90%, while the Sensex surged 35.72%.
Technical Indicators and Investor Sentiment
Technically, Tata Elxsi is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling a bearish trend. Investor participation appears to be waning, with delivery volumes on 9-Dec falling by 53.67% compared to the five-day average, indicating reduced buying interest. Despite this, the stock remains sufficiently liquid, with a trade size capacity of approximately ₹2.61 crore based on 2% of the five-day average traded value.
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Fundamental Challenges Weighing on the Stock
Despite Tata Elxsi’s strong management efficiency, reflected in a high return on equity (ROE) of 34.06%, the company faces significant fundamental headwinds. Its operating profit growth over the past five years has been modest at an annual rate of 14.77%, which is considered poor relative to industry standards. More concerning are the company’s recent quarterly results, which have been negative for three consecutive quarters. The profit before tax (excluding other income) declined sharply by 29.25% to ₹165.84 crore, while the profit after tax fell by 32.5% to ₹154.82 crore.
These disappointing earnings have contributed to the stock’s steep valuation challenges. Tata Elxsi trades at a price-to-book value of 11.2, which is very expensive despite being at a discount compared to its peers’ historical averages. The company’s ROE of 24.8 further underscores the high valuation, which investors may find difficult to justify given the recent profit declines and subdued growth prospects.
Long-Term Underperformance and Market Position
Over the last year, Tata Elxsi’s stock has generated a negative return of 34.19%, while its profits have contracted by 17.9%. This underperformance extends to longer periods, with the stock lagging behind the BSE500 index over the past three years, one year, and three months. Such sustained underperformance highlights the challenges the company faces in delivering consistent growth and shareholder value in a competitive market environment.
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Conclusion: Why Tata Elxsi Is Falling
The decline in Tata Elxsi’s share price as of 10-Dec is primarily attributable to its weak recent financial performance, including three consecutive quarters of negative results and significant profit declines. The stock’s technical indicators reinforce a bearish outlook, with prices trading below all major moving averages and falling investor participation. Additionally, the company’s high valuation metrics, combined with poor long-term growth and sustained underperformance relative to market benchmarks, have dampened investor confidence. While Tata Elxsi maintains strong management efficiency and low debt levels, these positives have not been sufficient to offset the negative earnings momentum and valuation concerns, leading to the current downward pressure on its stock price.
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