Stock Gains 10% This Week, Making ‘Rounding Bottom’ at 52-Week Low!
One of the perpetual debates in the market is whether a 52-week low should be bought or not. Many investors find these lower prices a good reason to go long while others who like to follow the trend stay away from such stocks (on the long side). However, when one finds a very good reversal indication from lows, the risk-to-reward ratio becomes very lucrative.
One such counter that had been hammered down to a 52-week low but is now making a comeback is MedPlus Health Services Ltd (NS:). The company is in the online pharmacy business, helping customers to access its products, bills and all health records through the online store, medplusmart.com and has a market capitalization of INR 7,580 crores.
The stock has given good pain to investors since its listing at INR 1,040 in December last year, as from there, it tanked to an all-time low of INR 570 this month. That’s a massive capital erosion of around 45%. However, now the tide seems to be turning in the favor of long holders as the stock has started to show signs of strength from these beaten-down levels.
Image Description: Daily chart of MedPlus Health Services
Image Source: Investing.com
On the daily chart, the stock is forming a rounding bottom pattern which is a trend reversal signal and is known to reverse a downtrend to an uptrend. As this pattern is being formed at the 52-week low and that too after a 45% fall from the listing price, the potential of a reversal from here is quite good. The reversal has already started to materialize and the stock is up around 10% this week so far.
From a fundamental perspective, it is one of the very few new-age online businesses that are actually net profitable. In fact, for the last two fiscal years, the company has been posting record-high profit figures – INR 63.86 crores in FY21 and INR 95.81 crores in FY22. Looking at a rising graph in business operations, FIIs have also ramped up their stake to 3.74%, while mutual funds own 12.17% of the company, as of September 2022.
However, it should also be noted that despite a significant price fall and rising profits, the company still seems a bit expensive at a P/E ratio of 79.12. But there are no other similar businesses listed on the NSE that can be compared to MedPlus, while PhaemEasy had the plan to list but the management called back the IPO. Despite being at a P/E of 79.12, the company is at least making profits every year since FY15, which is a big plus as many online businesses these days are struggling to hit profits even at the EBITDA level.
One of the perpetual debates in the market is whether a 52-week low should be bought or not. Many investors find these lower prices a good reason to go long while others who like to follow the trend stay away from such stocks (on the long side). However, when one finds a very good reversal indication from lows, the risk-to-reward ratio becomes very lucrative.
One such counter that had been hammered down to a 52-week low but is now making a comeback is MedPlus Health Services Ltd (NS:). The company is in the online pharmacy business, helping customers to access its products, bills and all health records through the online store, medplusmart.com and has a market capitalization of INR 7,580 crores.
The stock has given good pain to investors since its listing at INR 1,040 in December last year, as from there, it tanked to an all-time low of INR 570 this month. That’s a massive capital erosion of around 45%. However, now the tide seems to be turning in the favor of long holders as the stock has started to show signs of strength from these beaten-down levels.
Image Description: Daily chart of MedPlus Health Services
Image Source: Investing.com
On the daily chart, the stock is forming a rounding bottom pattern which is a trend reversal signal and is known to reverse a downtrend to an uptrend. As this pattern is being formed at the 52-week low and that too after a 45% fall from the listing price, the potential of a reversal from here is quite good. The reversal has already started to materialize and the stock is up around 10% this week so far.
From a fundamental perspective, it is one of the very few new-age online businesses that are actually net profitable. In fact, for the last two fiscal years, the company has been posting record-high profit figures – INR 63.86 crores in FY21 and INR 95.81 crores in FY22. Looking at a rising graph in business operations, FIIs have also ramped up their stake to 3.74%, while mutual funds own 12.17% of the company, as of September 2022.
However, it should also be noted that despite a significant price fall and rising profits, the company still seems a bit expensive at a P/E ratio of 79.12. But there are no other similar businesses listed on the NSE that can be compared to MedPlus, while PhaemEasy had the plan to list but the management called back the IPO. Despite being at a P/E of 79.12, the company is at least making profits every year since FY15, which is a big plus as many online businesses these days are struggling to hit profits even at the EBITDA level.