Zomato Ltd., a leading player in India’s food delivery and restaurant discovery sector, has shown remarkable resilience and growth. As the company continues to expand its operations and improve its financial metrics, investors are keen to know whether it’s the right time to buy, sell, or hold Zomato shares. Here’s a comprehensive analysis of Zomato’s share price outlook based on its recent performance and expert insights.
1. Strong Momentum: Price Above Moving Averages
Zomato’s stock is trading above its short, medium, and long-term moving averages, signaling strong momentum. This sustained upward trend indicates robust investor confidence, making it a potentially attractive option for momentum investors.
2. Rising Net Cash Flow and Cash from Operating Activity
The company has shown a significant rise in net cash flow and cash from operating activities, reflecting its strong operational efficiency. This is a positive sign for long-term investors, as it indicates that Zomato is generating sufficient cash to fuel its growth and expansion.
3. High TTM EPS Growth
Zomato has demonstrated impressive growth in its Trailing Twelve Months (TTM) Earnings Per Share (EPS). This high EPS growth is a strong indicator of the company’s ability to generate increasing profits, which is crucial for sustained share price appreciation.
4. Strong Annual EPS Growth
In addition to TTM EPS growth, Zomato has shown strong annual EPS growth. This consistent improvement highlights the company’s ability to scale its business while maintaining profitability, making it an attractive option for growth-focused investors.
5. Good Quarterly Growth in Recent Results
Zomato’s recent quarterly results have been positive, with the company reporting good growth. This is a key indicator that the company’s strategies are working, and it is on a path of sustained growth.
6. Rising Net Profit Margins
The company has been able to increase its net profit margins on both a quarterly and TTM basis. This improvement in profitability suggests that Zomato is effectively managing its costs while increasing its revenue, a critical factor for long-term growth.
7. Improving Return on Capital Employed (RoCE)
Zomato has been effectively using its capital to generate profits, with RoCE improving over the last two years. This indicates that the company is making efficient use of its capital, which is a positive sign for investors.
8. Improving Return on Equity (ROE)
The company’s Return on Equity (ROE) has also been on the rise over the past two years. This improvement in ROE reflects Zomato’s ability to generate higher returns on shareholders’ equity, making it a more attractive investment.
9. Improving Return on Assets (ROA)
Zomato has been efficient in managing its assets to generate profits, as evidenced by an improving Return on Assets (ROA) over the last two years. A rising ROA is a strong indicator of the company’s operational efficiency.
10. Growth in Net Profit with Increasing Profit Margin
The company has shown consistent growth in net profit with increasing profit margins, both on a quarter-on-quarter (QoQ) and year-on-year (YoY) basis. This trend highlights Zomato’s ability to expand its bottom line while maintaining or improving its margins.
11. No Debt: Financial Flexibility
Zomato operates with no debt, providing it with significant financial flexibility. The absence of debt reduces financial risk and interest expenses, allowing the company to reinvest its profits into growth opportunities.
12. Increasing Revenue and Profits
Zomato has been increasing its revenue every quarter for the past four quarters, alongside consistent profit growth. This continuous improvement underscores the company’s strong market position and ability to capitalize on growing demand in the food delivery sector.
13. Improving Annual Net Profits
The company’s annual net profits have been improving over the last two years. This consistent profitability growth is a key factor in sustaining long-term shareholder value.
14. Improving Book Value Per Share
Zomato’s book value per share has also been on the rise over the past two years, indicating that the company’s assets are growing faster than its liabilities. This strengthens the company’s financial foundation, making it a more secure investment.
15. Zero Promoter Pledge: Strong Promoter Confidence
Zomato has zero promoter pledges, indicating strong confidence from its promoters. This is reassuring for investors, as it suggests that the promoters are fully committed to the company’s long-term success.
16. Positive Operating Profit and Margins
The company’s recent results showed growth in operating profit with an increase in operating margins on a YoY basis. This improvement in operating performance is a positive indicator of Zomato’s financial health.
17. Near 52-Week High: Strong Market Sentiment
Zomato’s stock is trading near its 52-week high, a sign of strong market sentiment. Stocks near their 52-week highs often attract more investor interest, indicating confidence in the company’s future prospects.
18. Brokers Upgraded Recommendations
In the past three months, several brokers have upgraded their recommendations or target prices for Zomato, reflecting increased confidence in the company’s growth potential and financial health.
19. Highest Recovery from 52-Week Low
Zomato has shown the highest recovery from its 52-week low, which is a strong indicator of the company’s resilience and investor confidence in its recovery potential.
20. RSI Indicating Price Strength
The Relative Strength Index (RSI) for Zomato is indicating strong price strength, a technical signal that often suggests continued upward movement in the stock.
21. Analyst Ratings: Overwhelmingly Positive
Based on the analysis of 26 analysts:
- 69% recommend a Buy.
- 19% suggest Outperform.
- 0% advise to Hold.
- 0% predict Underperform.
- 12% recommend Sell.
The overwhelmingly positive ratings from analysts reflect strong confidence in Zomato’s future growth prospects.
Buy, Sell, or Hold?
Zomato Ltd. exhibits strong financial performance, impressive growth metrics, and positive market sentiment, making it an attractive investment option. With strong momentum, improving profitability, and positive analyst ratings, Zomato is well-positioned for continued growth.