Returns On Capital At Trigyn Technologies (NSE:TRIGYN) Paint A Concerning Picture

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at Trigyn Technologies (NSE:TRIGYN) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Trigyn Technologies is:

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

0.081 = ₹542m ÷ (₹8.2b - ₹1.5b) (Based on the trailing twelve months to December 2022).

Thus, Trigyn Technologies has an ROCE of 8.1%. In absolute terms, that's a low return and it also under-performs the IT industry average of 14%.

Check out our latest analysis for Trigyn Technologies

Historical performance is a great place to start when researching a stock so above you can see the gauge for Trigyn Technologies' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Trigyn Technologies, check out these free graphs here.

What Can We Tell From Trigyn Technologies' ROCE Trend?

When we looked at the ROCE trend at Trigyn Technologies, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 8.1% from 17% five years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

Our Take On Trigyn Technologies' ROCE

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for Trigyn Technologies. However, despite the promising trends, the stock has fallen 14% over the last five years, so there might be an opportunity here for astute investors. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

On a final note, we found 3 warning signs for Trigyn Technologies (1 is potentially serious) you should be aware of.

While Trigyn 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.