Marico downgraded to 'Hold' rating by MarketsMOJO despite strong financial performance

Marico, a leading FMCG company in India, has recently been downgraded to a 'Hold' rating by MarketsMOJO on October 7, 2024. This decision was based on various factors, including the company's high management efficiency with a ROE of 35.75% and a low Debt to Equity ratio of 0 times. Additionally, Marico has shown positive results in the June 2024 quarter, with its operating cash flow at a record high of Rs 1,436.00 crore and a ROCE of 46.10%. The company also reported its highest net sales of Rs 2,643.00 crore in the same quarter.
Technically, the stock is currently in a Mildly Bullish range, with multiple factors such as MACD, KST, and DOW indicating a bullish trend. Marico also has a high institutional holding of 35.91%, which suggests that these investors have better capabilities and resources to analyze the company's fundamentals compared to retail investors.

However, one concern for Marico is its poor long-term growth, with net sales growing at an annual rate of 5.61% and operating profit at 9.56% over the last 5 years. The company also has a high ROE of 38.6, which makes its valuation very expensive with a price to book value of 23.1. Despite this, the stock is currently trading at a fair value compared to its average historical valuations.

In the past year, Marico's stock has generated a return of 27.10%, while its profits have only risen by 11.8%. This has resulted in a PEG ratio of 5, which indicates that the stock may be overvalued. Overall, while Marico has shown strong financial performance in the recent quarter, its long-term growth and expensive valuation may be a cause for concern for investors.