Swaraj Engines downgraded to 'Hold' by MarketsMOJO due to high valuation and slow growth

Swaraj Engines, a smallcap company in the diesel engines industry, has recently been downgraded to a 'Hold' rating by MarketsMOJO on September 4, 2024. This decision was based on the company's high management efficiency, with a ROE of 34.52%, and a low Debt to Equity ratio of 0 times.
In the latest quarter, Swaraj Engines has shown positive results with its highest operating cash flow of Rs 142.38 crore and highest dividend per share of Rs 95.00. The company also has a strong cash position with cash and cash equivalents of Rs 175.69 crore.

Technically, the stock is in a mildly bullish range and both the MACD and KST technical factors are also bullish. The majority shareholders of the company are the promoters, indicating their confidence in the company's performance.

Swaraj Engines has also been rated among the top 1% of companies by MarketsMojo, out of 4,000 stocks. It has also shown market-beating performance in the long term as well as the near term, with a return of 66.32% in the last year and outperforming BSE 500 in the last 3 years, 1 year, and 3 months.

However, the company has shown poor long-term growth with a net sales growth rate of 11.27% and operating profit growth rate of 9.89% over the last 5 years. With a ROE of 38, the stock is currently trading at an expensive valuation with a price to book value of 11.2. It is also trading at a premium compared to its historical valuations.

Despite the stock's strong performance in the past year, its profits have only risen by 3.8%, resulting in a high PEG ratio of 7.7. Based on these factors, MarketsMOJO has downgraded the stock to a 'Hold' rating. Investors are advised to carefully consider these factors before making any investment decisions.