MarketsMOJO Downgrades Solid Stone Company to 'Sell' Rating Due to Weak Long-Term Outlook

Solid Stone Company, a microcap company in the ceramics and allied industry, has recently received a 'Sell' rating from MarketsMOJO on May 2, 2024. This downgrade is based on several factors that indicate a weak long-term outlook for the company.
One of the main reasons for the 'Sell' rating is the company's weak fundamental strength. Over the past 5 years, Solid Stone Company has only seen a -7.09% CAGR growth in net sales, indicating a lack of growth potential. Additionally, the company has a high debt to EBITDA ratio of 6.74 times, which suggests a low ability to service its debt.

In terms of financial performance, the company's results for December 2023 were flat, with a -30.95% growth in net sales and the lowest cash and cash equivalents at Rs 0.03 crore. The PBDIT for the quarter was also at its lowest at Rs 0.89 crore.

Another concerning factor is the decreasing stake of promoters in the company. In the previous quarter, promoters decreased their stake by -0.75%, currently holding only 69.34% of the company. This could indicate a lack of confidence in the future of the business.

On a positive note, the stock is currently in a mildly bullish range and its MACD and KST technical factors are also bullish. The company also has an attractive valuation with a ROCE of 8.9 and an enterprise value to capital employed ratio of 1. Additionally, the stock is currently trading at a discount compared to its historical valuations.

However, despite a 31.51% return over the past year, the company's profits have only risen by 47%, resulting in a low PEG ratio of 0.2. This further supports the 'Sell' rating given by MarketsMOJO.

In conclusion, Solid Stone Company's recent downgrade to 'Sell' by MarketsMOJO is based on its weak long-term fundamental strength, low ability to service debt, and decreasing promoter confidence. While there are some positive factors, the overall outlook for the company is not promising. Investors should carefully consider these factors before making any investment decisions.