MarketsMOJO Downgrades Royal Orchid Hotels to 'Sell' Rating Due to Weak Fundamentals and Flat Results

Royal Orchid Hotels, a smallcap company in the hotel industry, has recently received a 'Sell' rating from MarketsMOJO on April 15, 2024. This downgrade is based on several factors, including weak long-term fundamental strength with an average Return on Capital Employed (ROCE) of 7.73%, poor long-term growth with only an 8.30% annual increase in net sales over the last 5 years, and a weak ability to service its debt with a poor EBIT to Interest (avg) ratio of 0.90.
In addition, the company's results for December 2023 were flat, further contributing to the 'Sell' rating. However, there are some mildly bullish technical factors, such as the stock being in a Mildly Bullish range and the MACD and Bollinger Band technical factors being Bullish.

Despite these technical factors, the company's valuation is still considered very attractive with a ROCE of 19.9 and an Enterprise value to Capital Employed ratio of 4. The stock is also currently trading at a discount compared to its average historical valuations. However, over the past year, while the stock has generated a return of 48.10%, its profits have only risen by 11.1%, resulting in a PEG ratio of 2.2.

Another factor to consider is the increasing participation of institutional investors in the company. These investors have increased their stake by 0.8% over the previous quarter and collectively hold 4.99% of the company. With their resources and capabilities, they are better equipped to analyze the fundamentals of companies compared to most retail investors.

Despite consistent returns over the last 3 years, with the stock outperforming BSE 500 in each of the last 3 annual periods, the recent downgrade by MarketsMOJO suggests caution for potential investors in Royal Orchid Hotels.