DiGiSPICE Technologies (NSE:DIGISPICE) Is Experiencing Growth In Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in DiGiSPICE Technologies' (NSE:DIGISPICE) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on DiGiSPICE Technologies is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.023 = ₹56m ÷ (₹7.3b - ₹4.9b) (Based on the trailing twelve months to September 2025).

Therefore, DiGiSPICE Technologies has an ROCE of 2.3%. In absolute terms, that's a low return and it also under-performs the Software industry average of 11%.

See our latest analysis for DiGiSPICE Technologies

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of DiGiSPICE Technologies.

What Does the ROCE Trend For DiGiSPICE Technologies Tell Us?

Shareholders will be relieved that DiGiSPICE Technologies has broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 2.3% on its capital. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Essentially the business now has suppliers or short-term creditors funding about 67% of its operations, which isn't ideal. And with current liabilities at those levels, that's pretty high.

The Bottom Line

To bring it all together, DiGiSPICE Technologies has done well to increase the returns it's generating from its capital employed. Astute investors may have an opportunity here because the stock has declined 46% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

Like most companies, DiGiSPICE Technologies does come with some risks, and we've found 1 warning sign that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.