Eqonex Limited (EQOS) is a Hong Kong-based financial services company that is focused on fairness, governance, and innovation in digital assets. In addition, it provides a front-to-back integrated trading platform called Access Trading, a securitization advice service called EQONEX Capital, market-leading hot and cold custodian Digivault, and an asset management service under the name Bletchley Park.

Closing yesterday’s trading session at $5.89, EQOS shares have gained 85.8% in price over the past month, driven by its recent Polkadot (DOT) token listing on its platform. However, the stock has declined 63.5% in price so far this year.

Several well-known players, including the likes of Robinhood Markets, Inc. (HOOD) and Coinbase Global, Inc. (COIN), dominate the digital assets trading market. In contrast, EQOS is still in its early stages of development and faces stiff competition in the competitive cryptocurrency trading industry. In addition, given the company’s poor profitability and bloated valuation, its near-term prospects look uncertain.

Click here  to check out our Cryptocurrency Industry Report for 2021

Here is what could shape EQOS’ performance in the near term:

Poor Profitability

EQOS’ trailing-12-months asset turnover ratio is zero, versus the 0.21% industry average. Also, its ROC and ROA are negative 164.7% and 123.5%, respectively. Furthermore, its trailing-12-months cash from operations stood at negative $39.4 million compared to the $133.62 million industry average.

Premium Valuation

In terms of trailing-12-months Price/Book, the stock is currently trading at 3.7x, which is 182.9% higher than the1.31x industry average. Also, its 10.03x forward EV/Sales multiple is 190.9% higher than the 3.45x industry average. Moreover, EQOS’ 13.38x forward Price/Sales  is 280.6% higher than the 3.52x industry average.

POWR Ratings Reflect Uncertainty

EQOS has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. EQOS has an F grade for Value and Quality. The company’s higher-than-industry valuation justifies the Value grade. In addition, the company’s poor profitability is in sync with the Quality grade.

The stock also has a D grade for Stability, which is consistent with its 1.52 beta.

Of the 147 stocks in the D-rated Financial Services (Enterprise) industry, EQOS is ranked #145.

Beyond what I’ve stated above, one can view EQOS ratings for Growth, Momentum, and Sentiment here.

Bottom Line

The company has garnered significant investor attention lately due to Polkadot token’s listing on its platform. However, the stock seems highly volatile, and its poor profitability does not justify its stretched valuation. Thus, we think EQOS is best avoided now.

How Does Eqonex Limited (EQOS) Stack Up Against its Peers?

While EQOS has an overall D rating, one might want to consider its industry peers Forrester Research (FORR), CPI Card Group Inc. (PMTS), and Donnelley Financial Solutions Inc. (DFIN), each of which has an overall A (Strong Buy) rating.

Click here  to check out our Cryptocurrency Industry Report for 2021

EQOS shares were trading at $5.72 per share on Monday morning, down $0.17 (-2.89%). Year-to-date, EQOS has declined -64.56%, versus a 26.65% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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