Quicktouch Technologies (NSE:QUICKTOUCH) Might Be Having Difficulty Using Its Capital Effectively

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Quicktouch Technologies (NSE:QUICKTOUCH) and its ROCE trend, we weren't exactly thrilled.

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Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Quicktouch Technologies, this is the formula:

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

0.0097 = ₹17m ÷ (₹2.0b - ₹217m) (Based on the trailing twelve months to June 2025).

So, Quicktouch Technologies has an ROCE of 1.0%. In absolute terms, that's a low return and it also under-performs the IT industry average of 17%.

See our latest analysis for Quicktouch Technologies

Historical performance is a great place to start when researching a stock so above you can see the gauge for Quicktouch Technologies' ROCE against it's prior returns. If you're interested in investigating Quicktouch Technologies' past further, check out this free graph covering Quicktouch Technologies' past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

When we looked at the ROCE trend at Quicktouch Technologies, we didn't gain much confidence. Around five years ago the returns on capital were 17%, but since then they've fallen to 1.0%. Given the business is employing more capital while revenue has slipped, this is a bit concerning. This could mean that the business is losing its competitive advantage or market share, because while more money is being put into ventures, it's actually producing a lower return - "less bang for their buck" per se.

On a related note, Quicktouch Technologies has decreased its current liabilities to 11% of total assets. Considering it used to be 62%, that's a huge drop in that ratio and it would explain the decline in ROCE. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.

Our Take On Quicktouch Technologies' ROCE

In summary, we're somewhat concerned by Quicktouch Technologies' diminishing returns on increasing amounts of capital. Unsurprisingly then, the stock has dived 70% over the last year, so investors are recognizing these changes and don't like the company's prospects. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere.

Quicktouch Technologies does have some risks, we noticed 4 warning signs (and 3 which are significant) we think you should know about.

While Quicktouch Technologies isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.