A stock is said to be “fundamentally strong” if it portrays a specific set of characteristics, viz, strong and consistent financial performance, lower leverage ratios, and many more.
Listed below is one such fundamentally strong stock under the ‘small-cap’ category to buy now for a potential upside of more than 30 percent:
Amber Enterprises India Limited
With a market capitalization of Rs 10,046.29 crores, the stocks of Amber Enterprises India Limited started their trading session on Tuesday at Rs 2,986.10 and currently trades at Rs 2,981.65, a flat movement as compared to the previous closing levels of Rs 2,984.95 apiece.
Having a glance at the financials, the company, over the past couple of financial years, has reported a consistent increase in its operating revenues and after-tax profits with the most recent movement in the former being from Rs 4,206.4 crores during FY21-22 to Rs 6,927.1 crores during FY22-23, and, the latter, moving up from Rs 111.32 crores to Rs 163.78 crores during the same period.
As a result of the above, the company’s basic profitability ratios took an upward shift with the return on equity (RoE) recently increasing from 6.70 percent during FY21-22 to 9.14 percent during FY22-23. Moreover, the return on capital employed (RoCE) increased from 8.35 percent to 10.75 percent keeping the timeframe the same.
The company’s debt-to-equity ratio, one of the most popular leverage metrics, though increased, has stayed within the desired limits with the recent shift from 0.62 times during FY21-22 to 0.78 times during FY22-23.
Jefferies, one of the well-known Investment Banks across the globe, gave a ‘Buy’ recommendation for the stock with a target price of Rs 3,990 indicating a potential upside of 33.80 percent as compared to the current stock price prevailing in the market.
The investment rationale behind providing such a recommendation pertains to new capex plans, faster component sales, client additions, and other potential benefits from the PLI scheme.
As per the latest shareholding pattern data for the September 2023 quarter, the company’s Promoters hold a 40.31 percent stake, and the Foreign Institutional Investors (FIIs) hold a considerable stake of 29.69 percent in the company.
Amber Enterprises India Limited is engaged in the business of manufacturing consumer durable products as well as its components. The company offers a wide range of products such as air conditioners, refrigerators, microwave ovens, luminaries, and many more.
Written by Amit Madnani
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