MarketsMOJO Downgrades Bhilwara Spinners to 'Sell' Due to Weak Fundamentals and Expensive Valuation

Bhilwara Spinners, a microcap trading company, has recently been downgraded to a 'Sell' by MarketsMOJO on September 2, 2024. This decision was based on the company's weak long-term fundamental strength, poor growth in net sales and operating profit, and its inability to service its debt.
According to MarketsMOJO, Bhilwara Spinners has an average Return on Capital Employed (ROCE) of 0.01%, indicating weak long-term fundamental strength. The company's net sales have only grown by an annual rate of 40.54% and its operating profit at 14.64% over the last 5 years, showing poor long-term growth. Additionally, the company's EBIT to Interest (avg) ratio is at -0.38, indicating its weak ability to service its debt.

Furthermore, the stock is currently trading at a very expensive valuation with a 2.1 Enterprise value to Capital Employed. However, it is trading at a fair value compared to its average historical valuations. In the past year, the stock has generated a return of 184.53%, but its profits have only risen by 37.1%.

On a positive note, Bhilwara Spinners has shown positive results in June 2024, with higher net sales of Rs 13.57 crore and a DEBTORS TURNOVER RATIO (HY) of 18.08 times, the highest in the last 3 years. Its PBDIT (Q) is also at its highest at Rs 1.42 crore.

Technically, the stock is in a mildly bullish range, with its MACD and KST technical factors also showing a bullish trend. The majority shareholders of the company are the promoters, indicating their confidence in the company's future.

Despite generating consistent returns over the last 3 years and outperforming BSE 500, MarketsMOJO has downgraded Bhilwara Spinners to a 'Sell' due to its weak long-term fundamentals and expensive valuation. Investors should carefully consider these factors before making any investment decisions.