Supertex Industries Downgraded to 'Sell' by MarketsMOJO Due to Weak Financial Performance and High Debt Levels

Supertex Industries, a microcap textile company, has recently been downgraded to a 'Sell' by MarketsMOJO on April 23, 2024. This decision was based on several factors, including weak long-term fundamental strength, low ability to service debt, and low profitability per unit of shareholders funds.
One of the main reasons for the downgrade is the company's weak financial performance over the last 5 years, with a -4.42% CAGR growth in net sales. Additionally, Supertex Industries has a high debt to EBITDA ratio of 5.84 times, indicating a low ability to service its debt.

In the past year, while the market (BSE 500) has generated returns of 38.02%, Supertex Industries has underperformed significantly with negative returns of -5.55%. This underperformance is a cause for concern for investors.

On a positive note, the company has shown some improvement in its financial results in December 2023, with a higher PAT (HY) of Rs 0.11 crore and a 58.79% growth in net sales (Q). However, the technical trend for the stock is currently sideways, indicating no clear price momentum.

Another factor to consider is the company's valuation, with a ROCE of 4.1 and a very attractive enterprise value to capital employed ratio of 0.7. This suggests that the stock is currently trading at a discount compared to its historical valuations.

It is worth noting that the majority of shareholders in Supertex Industries are non-institutional investors. This could potentially lead to higher volatility in the stock price.

In conclusion, while Supertex Industries may have shown some positive results in its recent financials, the overall weak long-term performance and high debt levels make it a risky investment. Investors should carefully consider these factors before making any investment decisions.