Schaeffler India Downgraded to 'Sell' by MarketsMOJO Due to Expensive Valuation and Flat Results
Schaeffler India, a leading player in the bearings industry, has recently been downgraded to a 'Sell' by MarketsMOJO on November 18, 2024. This decision was based on the company's flat results in September 2024, with its cash and cash equivalents at a low of Rs 1,112.13 crore and a debtors turnover ratio of 5.70 times, the lowest in the industry.One of the main reasons for the downgrade is the company's expensive valuation, with a price to book value of 11 and a return on equity (ROE) of 18.7. This indicates that the stock is currently trading at a premium compared to its historical valuations. However, it is worth noting that the stock is currently trading at a discount compared to its average historical valuations.
Despite generating a return of 26.39% in the past year, the company's profits have only risen by 2.9%, resulting in a high PEG ratio of 20.4. This suggests that the stock may be overvalued and not a good investment option at the moment.
On the positive side, Schaeffler India has shown high management efficiency with a ROE of 16.48% and a low debt to equity ratio of 0 times on average. This indicates that the company is well-managed and has a healthy long-term growth potential.
In terms of technical trends, the stock has been trading sideways, indicating no clear price momentum. However, the technical trend has improved from mildly bearish on November 18, 2024, and has generated a return of 0.43% since then.
Another factor to consider is the high institutional holdings of 20.32%. These investors have better capability and resources to analyze the fundamentals of companies, making their investment decisions more reliable.
In conclusion, while Schaeffler India has shown strong management efficiency and healthy long-term growth potential, its expensive valuation and flat results have led to a 'Sell' rating by MarketsMOJO. Investors should carefully consider these factors before making any investment decisions.
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