Meanwhile, it has soared over 743 percent in the last one year.
This recent surge has led to the stock soaring over 849 percent from its 52-week low of ₹17.40, hit on July 21, 2023.
This year so far, the scrip has given positive returns in 4 of the 5 months to date. The stock has risen 14.5 percent in May following an over 58 percent surge in April. However, it fell 8 percent in April. Meanwhile, it was also positive in the first 2 months of this year, gaining over 51 percent in February and 58.5 percent in January 2024.
However, it is important to note that the stock is currently trading under ESM: Stage 2
In the long term as well, the stock has given multibagger returns, rallying 634 percent in the last 5 years, from ₹22.50 in May 2019; and 828 percent in the last 3 years from ₹17.79 in May 2021.
What is ESM?
The Enhanced Surveillance Measure (ESM) is a regulatory framework implemented by the National Stock Exchange (NSE) in India. It aims to enhance monitoring and surveillance of listed companies to ensure investor protection and market integrity.
Under Stage I, the trading of the securities is settled through a trade-for-trade mechanism with a price band of 5 percent, or 2 percent.
Under Stage II, the surveillance action permits trading on all trading days under periodic call auctions with trade-for-trade settlement and a 2 percent price band. Earlier this stage permitted trading just once a week.
About the firm
Ace Software Exports Limited, together with its subsidiaries, provides document management, digital publishing, and data conversion solutions using process engineering and conversion systems in India. The company also offers digital content; and publishing services, which include pre-press, e-book formatting, editorial, cover design, and document conversion, as well as distributes and markets content through social media and print-on-demand platforms. In addition, it provides technology consulting and develops applications, websites, software, IT infrastructure, workflow improvement, and project management. It serves publishers and other organisations. The company was founded in 1987 and is based in Rajkot, India.
Earnings
In the December quarter (Q4FY24), the net profit of Ace surged 775 percent year-on-year (YoY) to ₹2.8 crore from 0.32 crore in Q3FY23. Meanwhile, its total income also jumped 114 percent YoY to ₹5.1 crore in the quarter under review as against ₹2.38 crore in the same quarter last year.
Brokerage view
According to ICICI Direct’s analysis, Ace exhibits several positive factors contributing to its strong momentum in the market. One of the key positives of Ace Software, as per the brokerage, is the MACD crossover above the signal line, indicating a bullish trend in the stock’s price movement. Additionally, the promoter holding has increased by more than 2 percent quarter-on-quarter, reflecting confidence in the company’s prospects. Furthermore, the stock exhibits strong momentum, with its price trading above both short-term, medium-term, and long-term moving averages, suggesting sustained upward momentum in the stock’s performance, noted ICICI.
Meanwhile, its weaknesses, as per the brokerage are –
– The company’s other income is rising while operating income is low.
– Declining Net Cash Flow: The company is not able to generate net cash.
– Book Value Per Share of the company has been deteriorating for the last 2 years.
Investing in shares of small companies with low market capitalisation presents the potential for significant gains owing to their lower stock prices. However, this investment avenue comes with notable risks. Such stocks often suffer from limited liquidity, leading to fewer transactions compared to larger counterparts. Moreover, they typically lack the stringent financial reporting and oversight seen in larger corporations, rendering them susceptible to price manipulation and fraudulent activities.
Given their restricted liquidity and diminished oversight, stocks of small companies frequently exhibit heightened volatility, amplifying risks for investors. Therefore, conducting thorough research and implementing careful risk management strategies are imperative to navigate the uncertainties associated with these stocks and mitigate potential losses.
Disclaimer: This story is for educational purposes only. Please speak to an investment advisor before making any investment decisions.
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Published: 13 May 2024, 04:13 PM IST
