Nirlon Downgraded to 'Sell' by MarketsMOJO Due to High Debt and Poor Growth

Nirlon, a smallcap company in the miscellaneous industry, has recently been downgraded to a 'Sell' by MarketsMOJO on August 13, 2024. This decision was based on several factors, including the company's high debt to equity ratio of 2.26 times, indicating a heavy reliance on borrowing. Additionally, Nirlon has shown poor long-term growth with net sales growing at an annual rate of 15.11% and operating profit at 19.13% over the last 5 years.
Furthermore, with a ROCE of 28.9, Nirlon's valuation is considered very expensive with an enterprise value to capital employed ratio of 3.4. However, the stock is currently trading at a discount compared to its average historical valuations. In the past year, while the stock has generated a return of 4.42%, its profits have only risen by 6.3%, resulting in a PEG ratio of 2.4. On the positive side, the company has a high dividend yield of 6.1%.

Nirlon has also underperformed the market in the last year, with a return of only 4.42% compared to the market's (BSE 500) return of 34.08%. In terms of other factors, the company has shown positive results in June 2024, with its ROCE (HY) at its highest at 27.99%, net sales (Q) at Rs 156.51 crore, and operating profit to interest (Q) at 4.05 times.

From a technical standpoint, Nirlon's trend is currently sideways, indicating no clear price momentum. The technical trend has also deteriorated from mildly bullish on August 13, 2024, and has generated a return of -0.26% since then.

It is worth noting that institutional investors have increased their stake in Nirlon by 0.89% over the previous quarter and now collectively hold 15.24% of the company. This suggests that these investors, who have better resources and capabilities to analyze company fundamentals, may have also played a role in the downgrade of Nirlon's stock. Overall, it is important for investors to carefully consider all factors before making any investment decisions regarding Nirlon.