MarketsMOJO Downgrades Zeal Aqua to 'Sell' Due to Weak Fundamentals

Zeal Aqua, a microcap company in the aquaculture industry, has recently received a 'Sell' rating from MarketsMOJO on March 4th, 2024. This downgrade is based on several factors that indicate weak long-term fundamental strength for the company.
One of the main reasons for the 'Sell' rating is the company's average Return on Capital Employed (ROCE) of 5.42%, which is considered low. Additionally, Zeal Aqua has shown poor long-term growth with only a 20.45% annual growth in Net Sales and 11.63% in Operating profit over the last 5 years.

Another concerning factor is the company's high Debt to EBITDA ratio of 6.95 times, indicating a low ability to service debt. This was reflected in the company's flat results in December 2023, where non-operating income accounted for 55.01% of the Profit Before Tax (PBT).

On a positive note, the stock is currently in a Mildly Bullish range and its MACD and KST technical factors are also Bullish. With an ROCE of 6.2, the stock is considered to have an attractive valuation with a 1.4 Enterprise value to Capital Employed. It is also trading at a discount compared to its average historical valuations.

However, despite generating a return of 50.20% in the last year, the company's profits have only risen by 12%, resulting in a PEG ratio of 1.8. This indicates that the stock may be overvalued.

It is worth noting that the majority shareholders of Zeal Aqua are the promoters, which may raise concerns about potential conflicts of interest. However, the company has shown market-beating performance in the long term, outperforming the BSE 500 index in the last 3 years, 1 year, and 3 months.

In conclusion, while Zeal Aqua may have some positive aspects, the recent 'Sell' rating from MarketsMOJO highlights some concerning factors that investors should consider before making any decisions.