Salona Cotspin Downgraded to 'Sell' by MarketsMOJO: High Debt and Negative Financial Performance Raise Concerns

Salona Cotspin, a microcap textile company, has recently been downgraded to a 'Sell' by MarketsMOJO on April 22, 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. In addition, the company's financial performance in December 2023 showed negative results, with a -60.72% growth in PAT (HY) and a -54.3% fall in PBT LESS OI (Q). The operating profit to interest ratio was also at its lowest at 1.25 times.
Furthermore, Salona Cotspin has underperformed the market in the last year, with a return of only 14.30%, compared to the market's return of 37.60% (BSE 500). However, the company has shown high management efficiency with a ROCE of 15.83% and has a healthy long-term growth rate, with net sales growing at an annual rate of 38.61%.

On a technical level, the stock's trend is currently sideways, indicating no clear price momentum. The stock's technical trend has also deteriorated since April 22, 2024, when it was mildly bullish, and has generated a return of -0.4% since then.

Despite these negative factors, Salona Cotspin does have some positive aspects. It has an attractive valuation with a ROCE of 8.5 and an enterprise value to capital employed ratio of 1.3. Additionally, the stock is currently trading at a discount compared to its average historical valuations. However, it is important to note that while the stock has generated a return of 14.30% in the past year, its profits have fallen by -46.8%.

It is also worth mentioning that the majority shareholders of Salona Cotspin are the promoters of the company. Overall, with the recent downgrade to 'Sell' and the various financial and market performance factors, investors may want to carefully consider their position in Salona Cotspin.