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 October 8th, 2024. This decision was based on several factors, including the company's high debt to equity ratio and poor long-term growth in net sales and operating profit. With a ROCE of 28.9, the company's valuation is considered very expensive with a 3.3 enterprise value to capital employed.
Despite the stock trading at a discount compared to its historical valuations, it has underperformed the market in the last year with a return of only 1.64%. Additionally, the PEG ratio of the company is 2.4, indicating that its profits have not kept up with its stock price. However, the company does have a high dividend yield of 6.2 at its current price.

On a positive note, Nirlon did show positive results in June 2024, with its ROCE at 27.99% and net sales at Rs 156.51 crore. However, the technical trend for the stock is currently sideways, with no clear price momentum. Institutional investors have also increased their stake in the company, holding 15.24% collectively. This suggests that they have better resources and capabilities to analyze the company's fundamentals compared to retail investors.

Overall, the downgrade to 'Sell' by MarketsMOJO is based on the company's high debt and poor long-term growth, as well as its expensive valuation. Investors should carefully consider these factors before making any decisions regarding Nirlon's stock.