MarketsMOJO downgrades H. S. India to 'Sell' due to weak fundamentals and low profitability

H. S. India, a microcap company in the hotel industry, has recently been downgraded to a 'Sell' by MarketsMOJO on June 25, 2024. This decision was based on several factors, including weak long-term fundamental strength, poor ability to service debt, and low profitability per unit of shareholders' funds.
One of the main reasons for the downgrade is the company's weak CAGR growth in operating profits over the last 5 years, which stands at -6.54%. Additionally, the company's EBIT to Interest ratio is only 1.21, indicating a weak ability to service its debt. Furthermore, the company's Return on Equity (avg) is at a low 3.55%, highlighting its low profitability.

In terms of technical factors, the stock is currently in a mildly bullish range, with both the MACD and KST technical indicators also showing a bullish trend. However, with a ROCE of 6.5, the stock is considered to have an attractive valuation with a 0.9 Enterprise value to Capital Employed. It is also trading at a discount compared to its average historical valuations.

Despite generating a return of 48.31% in the past year, the company's profits have only risen by 30.1%, resulting in a PEG ratio of 0.7. This suggests that the stock may be overvalued compared to its earnings growth potential.

It is worth noting that the majority of shareholders in H. S. India are non-institutional investors. However, the company has consistently generated returns over the last 3 years and has outperformed the BSE 500 index in each of the last 3 annual periods.

In conclusion, while H. S. India may have shown some positive technical indicators, its weak fundamental strength and low profitability make it a 'Sell' according to MarketsMOJO. Investors should carefully consider these factors before making any investment decisions.