Salona Cotspin downgraded to 'Sell' by MarketsMOJO due to high debt and declining profits

Salona Cotspin, a microcap textile company, has recently been downgraded to a 'Sell' by MarketsMOJO on November 18, 2024. This decision was based on several factors, including the company's high debt to EBITDA ratio of 3.64 times, indicating a low ability to service debt. Additionally, the company's financial results for the quarter ending September 24 showed a decline in profits by -22.66% and the lowest net sales of Rs 166.06 crore.
In the past year, Salona Cotspin has underperformed the market, generating a return of only 2.75% compared to the market's return of 23.90%. However, the company has shown high management efficiency with a ROCE of 15.83% and a healthy long-term growth rate of 44.58% in net sales.

The technical trend for the stock is currently sideways, indicating no clear price momentum. It has also been trading at a discount compared to its average historical valuations, with an attractive valuation of 1.2 Enterprise value to Capital Employed and a ROCE of 7.7.

It is worth noting that the majority shareholders of Salona Cotspin are the promoters, indicating their confidence in the company's future prospects. However, it is important to consider the recent downgrade and the company's financial performance before making any investment decisions.