Mercantile Investments & Finance PLC (MERC.N0000) Stock Recommendation | Score, Valuation, Technicals & Financial Trend

Score

Click here to find our call on this stock

Strong Sell

Sell

Hold

Buy

Strong Buy

Comparison

Company

Score

Quality

Valuation

Financial

Technical

Commercial Credit & Finance PLC

LOLC Finance Plc

People's Leasing & Finance PLC

Alliance Finance Co. Plc

Central Finance Co. Plc

Dialog Finance Plc

HNB Finance Plc

Mercantile Investments & Finance PLC

LOLC Holdings Plc

Senkadagala Finance PLC

Hunter & Co. Plc

Why is Mercantile Investments & Finance PLC ?

Weak Long Term Fundamental Strength with an average Return on Equity (ROE) of 5.78%

Poor long term growth as Operating profit has grown by an annual rate of 9.15%
The company has been able to generate a Return on Equity (avg) of 5.78% signifying low profitability per unit of shareholders funds

Poor long term growth as Operating profit has grown by an annual rate of 9.15%

The company has declared Positive results for the last 6 consecutive quarters

OPERATING CASH FLOW(Y) Highest at LKR 2,718.58 MM
ROCE(HY) Highest at 9.08%
CASH AND EQV(HY) Highest at LKR 10,791.36 MM

With ROE of 8.42%, it has a fair valuation with a 1.23 Price to Book Value

The stock is trading at a discount compared to its peers' average historical valuations
Over the past year, while the stock has generated a return of -98.69%, its profits have risen by 82.3% ; the PEG ratio of the company is 0.2

Consistent Underperformance against the benchmark over the last 3 years

Along with generating -98.69% returns in the last 1 year, the stock has also underperformed Sri Lanka CSE All Share in each of the last 3 annual periods

Real-Time Research Report

Verdict Report

How much should you hold?

Overall Portfolio exposure to Mercantile Investments & Finance PLC should be less than 10%
Overall Portfolio exposure to Finance should be less than 30%

(If sector exposure > 30%, please use optimiser tool to see which are the best stocks to hold in Finance)

When to exit? - We will constantly monitor the company and suggest at the appropriate time to exit from the stock

Is Mercantile Investments & Finance PLC for you?

High Risk, Low Return

Absolute

Risk Adjusted

Volatility

Mercantile Investments & Finance PLC

-98.69%

-0.55

179.99%

Sri Lanka CSE All Share

41.16%

2.63

15.67%

Quality

Management Risk

Growth

Capital Structure

Quality grade scale :

Below Average, Average, Good, Excellent

Quality key factors

Factor

Value

Sales Growth (5y)

12.10%

EBIT Growth (5y)

9.15%

EBIT to Interest (avg)

100.00

Debt to EBITDA (avg)

Negative Net Debt

Net Debt to Equity (avg)

Sales to Capital Employed (avg)

Tax Ratio

37.32%

Dividend Payout Ratio

11.64%

Pledged Shares

Institutional Holding

ROCE (avg)

9.39%

ROE (avg)

5.78%

Valuation

Valuation Scorecard

Valuation grade scale :

Very Risky, Risky, Very Expensive, Expensive, Fair, Attractive, Very Attractive

Valuation Key Factors

Factor

Value

P/E Ratio

Industry P/E

Price to Book Value

1.23

EV to EBIT

7.79

EV to EBITDA

6.70

EV to Capital Employed

1.32

EV to Sales

1.15

PEG Ratio

0.18

Dividend Yield

0.00%

ROCE (Latest)

16.93%

ROE (Latest)

8.42%

Technicals

Technical key factors

Indicator

Weekly

Monthly

MACD

Bearish

RSI

Bullish

Bearish

Bollinger Bands

Bearish

Moving Averages

Bearish (Daily)

KST

Bearish

Bullish

Dow Theory

No Trend

Mildly Bearish

OBV

No Trend

Mildly Bearish

Technical Indicator Scale: Bearish, Mildly Bearish, Sideways, Mildly Bullish, Bullish Turned

Technical Movement

Analyse All Technical Factors

Financial Trend

Financial Trend Scorecard

Financial Trend scale:

Very Negative, Negative, Flat, Positive, Very Positive, Outstanding

8What is working for the Company

OPERATING CASH FLOW(Y)

Highest at LKR 2,718.58 MM

ROCE(HY)

Highest at 9.08%

CASH AND EQV(HY)

Highest at LKR 10,791.36 MM

NET SALES(Q)

Highest at LKR 4,231.67 MM

-6What is not working for the Company

DEBT-EQUITY RATIO (HY)

Highest at 205.93 %

RAW MATERIAL COST(Y)

Grown by 10.43% (YoY

INVENTORY TURNOVER RATIO(HY)

Lowest at 21.25 times

Here's what is working for Mercantile Investments & Finance PLC

Operating Cash Flow

Highest at LKR 2,718.58 MM and Grown

In each year in the last three years

MOJO Watch

The company has generated higher cash revenues from business operations

Operating Cash Flows (LKR MM)

Net Sales

Highest at LKR 4,231.67 MM

in the last five periods

MOJO Watch

Near term sales trend is positive

Net Sales (LKR MM)

Net Sales

At LKR 4,231.67 MM has Grown at 31.72%

over average net sales of the previous four periods of LKR 3,212.63 MM

MOJO Watch

Near term sales trend is positive

Net Sales (LKR MM)

Cash and Eqv

Highest at LKR 10,791.36 MM

in the last six Semi-Annual periods

MOJO Watch

Short Term liquidity is improving

Cash and Cash Equivalents

Depreciation

Highest at LKR 97.78 MM

in the last five periods

MOJO Watch

The expenditure on assets done by the company may have gone into operation

Depreciation (LKR MM)

Here's what is not working for Mercantile Investments & Finance PLC

Debt-Equity Ratio

Highest at 205.93 % and Grown

In each half year in the last five Semi-Annual periods

MOJO Watch

The company is borrowing more to fund its operations; it's liquidity situation may be stressed

Debt-Equity Ratio

Inventory Turnover Ratio

Lowest at 21.25 times

in the last five Semi-Annual periods

MOJO Watch

Company's pace of selling inventory has slowed

Inventory Turnover Ratio

Raw Material Cost

Grown by 10.43% (YoY)

MOJO Watch

The company's ability to pass on the cost of raw materials to customers has deteriorated; this may lead to a fall in profit margin

Raw Material Cost as a percentage of Sales