Umang Dairies Downgraded to 'Sell' by MarketsMOJO Due to Weak Fundamentals and High Debt Levels

Umang Dairies, a microcap company in the FMCG industry, has recently been downgraded to a 'Sell' by MarketsMOJO on 2024-08-07. This decision was based on several factors that indicate a weak long-term fundamental strength for the company.
One of the main reasons for the downgrade is the company's low ability to service debt, with a high Debt to EBITDA ratio of 5.88 times. This means that the company may struggle to pay off its debts in the future, which could negatively impact its financial stability.

Additionally, Umang Dairies has shown a -13.72% CAGR growth in Operating Profits over the last 5 years, indicating a lack of consistent profitability. The company's Return on Equity (avg) of 2.89% also suggests low profitability per unit of shareholders' funds.

Furthermore, the stock is currently trading at a discount compared to its average historical valuations, with a Very Expensive valuation of 3.6 Enterprise value to Capital Employed. This, combined with a PEG ratio of 1.4, indicates that the stock may be overvalued.

On a positive note, Umang Dairies has declared positive results for the last 2 consecutive quarters, with a growth in Net Profit of 791.55% in Mar 24. However, the company's OPERATING PROFIT TO INTEREST(Q) and PBDIT(Q) are at their highest levels, which could be a cause for concern.

From a technical standpoint, the stock is currently in a Mildly Bullish range, with both MACD and KST technical factors also showing a Bullish trend. However, it is important to note that the stock has outperformed the market (BSE 500) with a return of 95.61% in the last 1 year, indicating a potential risk for investors.

In conclusion, while Umang Dairies has shown some positive results in the past year, 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 microcap FMCG company.