Sarveshwar Foods Receives 'Sell' Rating from MarketsMOJO, Weak Fundamentals and High Debt Levels Raise Concerns

Sarveshwar Foods, a smallcap FMCG company, has recently received a 'Sell' rating from MarketsMOJO on September 10, 2024. This downgrade is based on several factors that indicate weak long-term fundamental strength for the company.
One of the main reasons for the 'Sell' rating is the company's low ability to service debt, with a high Debt to EBITDA ratio of 8.70 times. This indicates that the company may struggle to meet its financial obligations in the future. Additionally, Sarveshwar Foods has only seen a -5.31% CAGR growth in operating profits over the last 5 years, which is a cause for concern.

Moreover, the company's profitability per unit of shareholders' funds is also low, with a Return on Equity (avg) of 4.92%. This is further supported by the fact that the company has a relatively expensive valuation, with a 2.6 Enterprise value to Capital Employed and a PEG ratio of 0.8.

Institutional investors have also decreased their stake in the company by -1.05% over the previous quarter, indicating a lack of confidence in its future prospects. On the other hand, the company has declared positive results for the last 4 consecutive quarters, with a growth in PAT (HY) at Rs 7.23 crore and PBT LESS OI (Q) at Rs 3.67 crore.

From a technical standpoint, the stock is currently in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, and KST indicating a bullish trend. However, it is important to note that the stock has outperformed the market (BSE 500) with a return of 181.69% in the last year.

In conclusion, while Sarveshwar Foods may have shown some positive results in the past, the company's weak long-term fundamentals and high debt levels make it a risky investment. Investors should carefully consider these factors before making any decisions regarding this stock.