Magellanic Cloud, an IT service company, has seen its stock skyrocket by 8166% over the past five years and 4078% in the last three years. In the past year alone, the stock has risen by 201% and increased by 34% in 2024 so far.
This year, the stock has performed well, showing positive returns in four out of five months. It increased by around 1% in May after a 28% surge in April, although it dropped by 22.6% in March. In the first two months of 2024, the stock gained 15.6% in February and 16% in January.
Currently, the stock is trading just 8.5% below its all-time high of ₹672.05, reached on May 9, 2024. It has jumped 203% from its 52-week low of ₹203.05, recorded on May 30, 2023.
What is ASM Stage 2?
Magellanic Cloud is currently under ASM LT: Stage 2. ASM (Additional Surveillance Measure) is a regulatory framework by the Securities and Exchange Board of India (SEBI) to monitor stocks showing unusual trading patterns or high volatility. ASM Stage 2 involves stricter monitoring than Stage 1.
Stocks in ASM Stage 2 face higher margin requirements, meaning traders need more collateral to trade these stocks, which reduces speculative trading. There may also be restrictions on intraday trading and compulsory delivery-based trading. Additionally, price bands are narrower, limiting how much the stock price can change in a single session to prevent large, sudden movements.
About Magellanic Cloud
Magellanic Cloud Limited, based in Hyderabad, India, provides various IT services, including software solutions for mobile and desktop, digital transformation, product engineering, data analytics, cloud automation, and enterprise security. The company was founded in 1981 and was previously known as South India Projects Limited.
Recent Earnings
In the March quarter (Q4 FY24), Magellanic Cloud reported a significant increase in net profit to ₹3.97 crore, compared to ₹1.44 crore in the same period last year. However, this was a decrease from ₹5.2 crore in the previous quarter (December 2023). Revenue for the quarter was ₹15.42 crore, down 26% from ₹20.8 crore the previous year and down 18% from ₹18.77 crore in the December quarter.
Brokerage View
ICICI Direct has noted several strengths for Magellanic Cloud, including high earnings per share growth, increasing profit margins on a quarterly basis, and overall profit growth year-over-year. However, the company’s declining net cash flow is seen as a weakness.
Investing in Small-Cap Stocks
Investing in small-cap stocks like Magellanic Cloud can offer significant potential gains due to their lower prices, but it also comes with risks. These stocks often have limited liquidity, fewer transactions, and less rigorous financial reporting and oversight, making them susceptible to price manipulation and fraud. Due to these factors, small-cap stocks are more volatile. Thorough research and careful risk management are crucial when investing in these stocks to mitigate potential losses.
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