Sangal Papers downgraded to 'Sell' by MarketsMOJO due to weak performance and high debt

Sangal Papers, a microcap company in the paper and paper products industry, has recently been downgraded to a 'Sell' by MarketsMOJO on August 20, 2024. This decision was based on several factors, including weak long-term fundamental strength, poor growth in net sales and operating profit, and a high debt to EBITDA ratio.
In the last five years, Sangal Papers has only seen a 4.57% annual growth in net sales and a meager 0.61% growth in operating profit. This, combined with a low return on capital employed (ROCE) of 7.58%, indicates a weak long-term performance. Additionally, the company's high debt to EBITDA ratio of 3.93 times raises concerns about its ability to service debt.

The company's recent financial results for June 2024 also show a decline, with net sales at its lowest at Rs 42.61 crore. Furthermore, 38.76% of the promoter shares are pledged, which can put additional downward pressure on the stock prices in falling markets.

On a positive note, Sangal Papers' stock is currently in a mildly bullish range and has multiple bullish factors such as MACD, KST, and OBV. It also has an attractive valuation with a ROCE of 7.5 and a 0.8 enterprise value to capital employed. However, the stock is currently trading at a discount compared to its average historical valuations.

In the past year, Sangal Papers' stock has generated a return of 44.11%, but its profits have fallen by -8.2%. Despite this, the company has shown market-beating performance in the long term, outperforming BSE 500 in the last 3 years, 1 year, and 3 months.

Overall, MarketsMOJO's downgrade to 'Sell' for Sangal Papers is based on the company's weak long-term performance and high debt levels. Investors should carefully consider these factors before making any investment decisions.