MarketsMOJO downgrades LKP Finance to 'Sell' due to weak fundamentals and institutional investor hesitation

LKP Finance, a microcap finance company, has recently been downgraded to a 'Sell' by MarketsMOJO on February 21, 2024. This decision was based on several factors, including weak long-term fundamental strength with an average Return on Equity (ROE) of 11.94% and poor long-term growth with an annual operating profit growth rate of -9.11%.
In addition, institutional investors have decreased their stake in the company by -3.62% over the previous quarter, holding a collective 0% stake. This decrease in participation by institutional investors may indicate their lack of confidence in the company's fundamentals compared to retail investors.

However, LKP Finance has declared positive results for the last 5 consecutive quarters, with significant growth in PBT LESS OI(Q) at Rs 19.91 cr (70.0%), PAT(Q) at Rs 15.41 cr (63.4%), and NET SALES(Q) at Rs 19.90 cr (37.5%).

Technically, the stock is currently in a mildly bullish range, with multiple factors such as MACD, KST, and DOW indicating a bullish trend. Its ROE of 11.4 also suggests a fair valuation with a 0.9 price to book value. However, the stock is currently trading at a premium compared to its average historical valuations.

Despite generating a return of 195.76% in the past year, the company's profits have only risen by 503.9%, resulting in a PEG ratio of 0. This may indicate that the stock is overvalued.

On a positive note, LKP Finance has shown market-beating performance in the long term, outperforming BSE 500 in the last 3 years, 1 year, and 3 months. However, with the recent downgrade by MarketsMOJO, investors may want to carefully consider their investment in this microcap finance company.