Adcon Capital Services Limited, headquartered in Indore, Madhya Pradesh has recently made headlines for its extraordinary returns in a short period of time. The firm is a penny stock, and its price right now is around Rs. 5. The corporation, its stock prices, and other factors are examined in the article below.
But let’s not stray from the essentials.
Penny Stocks
Penny stocks are those that trade for very little money, have a smaller market size, and are typically relatively illiquid. Depending on the company’s market capitalization, penny stocks are also known as nano-cap stocks, micro-cap stocks, and small-cap stocks because of their price of less than Rs 10. Because of their high risk, little liquidity, tiny shareholder base, wide bid-ask spreads, and restricted information availability, these stocks are exceedingly speculative in nature.
These stocks have the following characteristics –
- High Returns
Due to the tiny size and recent expansion of the companies that provide these equities, they have strong returns. However, as these stocks respond violently to any market action, huge rewards come with high dangers as well.
- Low-Cost
These stocks are inexpensive and provide every investor a huge investment potential at a value of less than Rs. 10.
- Volatile and Unpredictable
These stocks have the potential to either produce sizable and significant returns or none at all. In other cases, depending on the market, they can even cause losses and are hence unpredictable.
- Illiquid
Because penny stock firms are unheard of and unloved, when someone wants to sell their shares, they might not be able to find a buyer who is interested, making these stocks very illiquid.
The Company
Adcon Capital Services Limited is a Non–Banking Financial Company (NBFC) from the Reserve Bank of India. It is a listed NBFC company that specializes in lending money, investing in other firms’ stock, and offering other financial services.
Financial highlights
- The company has 13% ROCE which is one of the highest among its peers.
- The company’s net profits are dropping; the most recent figure, as of September 2022, was a loss of 28 lakhs of rupees.
- Similar to the Net Profit, the company’s operational earnings do not seem good either, with the most recent figure showing an operating loss of Rs. 30 lakhs.
- The absence of debt on the company’s balance sheet is a highly encouraging indicator.
- The operating cash flows fluctuate from positive to negative from year to year, with a positive value of Rs. 26 lakh for the year ending March 2022.
Ratios and valuations
- The market capitalization of the company is Rs. 19.6 Crores.
- The company has a debtor days ratio of 164 days, which is not a very impressive value.
- The Price-to-Earnings ratio is roughly 138, which is significantly higher than its most prominent competitors.
Shareholdings
Public holdings make up all of the company’s holdings. This indicates that a high free float capital and a high stock price will be greatly impacted by even a small change in supply or demand.
The returns of adcon capital services
The business increased from 1.29 Rs in December 2022 to 5.26 Rs in January 2023. This indicates a whopping 300% return in just one month. The company has had high profits since its stocks have been in high demand in the market and there have been few sellers.
Because the company is an NBFC with an RBI certificate and has made profits in the past, the investors do not want to sell the stocks. The company’s P/E ratio is also favorable.
The company recently floated its rights issues, where 25 rights were available for every three shares owned and were largely subscribed to, despite the fact that it hasn’t been paying out dividends. A stock split announcement was made in April 2022 prior to this. The stock certainly hit its lows after these two occurrences, but it has since recovered better than ever.
Conclusion
Penny stocks are proven to generate positive returns when investments are made properly and risks are adequately assessed. Adcon Capital Services will have its annual general meeting on February 8, 2023. The release of the third quarter’s quarterly earnings at this time will further affect the price trajectory of the multibagger stock. Although it is admirable that this stock is generating good returns, based on earnings and other financial information, as well as the fact that it is 100% publicly held and subject to greater price volatility, it would seem that the stock is only profitable as a short-term investment.
