Why is Yatra Online falling/rising?

Recent Price Movement and Market Context

Yatra Online’s share price has experienced a notable pullback over the past week, underperforming the broader Sensex which remained nearly flat with a marginal decline of 0.06%. Despite this, the stock has outperformed its travel services sector, which fell by 2.29% on the same day. Intraday, the stock touched a low of Rs 171.85, down 3.1%, with heavier trading volume concentrated near this lower price point, signalling selling pressure among investors.

The stock’s moving averages reveal a nuanced technical picture: it remains above its 20-day, 50-day, 100-day, and 200-day averages, indicating sustained medium- to long-term strength, but it has slipped below the 5-day moving average, highlighting recent short-term weakness. This suggests that while the broader trend remains positive, immediate momentum has faltered.

Strong Fundamentals Underpinning Long-Term Growth

Yatra Online’s fundamentals remain compelling. The company boasts a zero debt-to-equity ratio, reflecting a conservative capital structure that reduces financial risk. Its net sales have grown at an impressive annual rate of 56.74%, while operating profit has surged by 101.05%, underscoring operational efficiency and expanding margins. The latest quarterly results, declared on 25 Sep, were very positive, with net sales growth of 67.23% and profit after tax (PAT) for the latest six months reaching Rs 30.28 crores, a remarkable increase of 167.02% year-on-year.

Additionally, Yatra Online’s return on capital employed (ROCE) for the half-year stands at a healthy 7.76%, and operating cash flow, though negative at Rs -88.65 crores annually, reflects ongoing investment in growth initiatives. These metrics have contributed to the stock’s stellar performance, delivering a 64.23% return over the past year, significantly outpacing the BSE500 index’s 6.09% gain.

Risks Tempering Investor Confidence

Despite these positives, certain risks may be contributing to the recent price decline. The company’s return on equity (ROE) is relatively low at 4.60%, indicating modest profitability relative to shareholders’ funds. This contrasts with the high growth in profits, suggesting that management efficiency could be improved. Furthermore, the stock trades at a price-to-book value of 3.3, which, while discounted relative to peers’ historical valuations, still reflects a premium that may deter some value-conscious investors.

Another notable concern is the declining participation of institutional investors. Over the previous quarter, these investors reduced their stake by 4.44%, now holding 17.47% of the company. Institutional investors typically possess greater analytical resources and may be signalling caution, which can influence market sentiment negatively. This reduced institutional interest, combined with a 36.78% drop in delivery volume on 21 Nov compared to the five-day average, points to waning investor enthusiasm in the short term.

Liquidity and Trading Dynamics

Liquidity remains adequate, with the stock’s average traded value supporting trades of up to Rs 0.84 crore based on 2% of the five-day average traded value. However, the weighted average price skewing towards the day’s low suggests that sellers have been more active, exerting downward pressure on the price. This selling pressure, coupled with the stock’s recent underperformance relative to its own recent highs, explains the current downward trend despite the company’s strong underlying business metrics.

Conclusion: Short-Term Weakness Amid Long-Term Strength

In summary, Yatra Online’s recent share price decline on 24-Nov is primarily driven by short-term selling pressure, reduced institutional participation, and technical factors such as slipping below the 5-day moving average. These elements have overshadowed the company’s strong fundamentals, including robust sales growth, improving profitability, and market-beating returns over the past year. Investors should weigh these short-term headwinds against the company’s healthy balance sheet and consistent positive quarterly results when considering their position in the stock.

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