Sarveshwar Foods Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals and High Debt

Sarveshwar Foods, a microcap FMCG company, has recently been downgraded to a 'Sell' by MarketsMOJO on October 7, 2024. This decision was based on several factors, including weak long-term fundamental strength with a -5.31% CAGR growth in operating profits over the last 5 years. Additionally, the company has a high debt to EBITDA ratio of 8.70 times, indicating a low ability to service debt. The return on equity (avg) of 4.92% also signifies low profitability per unit of shareholders' funds.
Furthermore, the company's valuation is considered expensive with a 2.2 enterprise value to capital employed and a PEG ratio of 0.7. Institutional investors have also decreased their stake in the company by -1.05% over the previous quarter, holding only 0% of the company collectively. This suggests that these investors, who have better resources and capabilities to analyze company fundamentals, have also lost confidence in Sarveshwar Foods.

On a positive note, the company has declared positive results for the last 4 consecutive quarters, with a growth of 53.50% in PAT (HY) and 49.19% in PBT LESS OI (Q). The debt-equity ratio (HY) is also at its lowest at 1.18 times. Technically, the stock is in a mildly bullish range, with MACD and KST technical factors also showing a bullish trend.

Despite these positive factors, the stock has underperformed the market (BSE 500) with a return of 84.04% in the last 1 year, compared to the market's return of 33.39%. Based on these factors, MarketsMOJO has downgraded Sarveshwar Foods to a 'Sell' and advises investors to carefully consider the company's weak long-term fundamentals and high debt before making any investment decisions.