Sigma Solve Limited engages in the enterprise software development business in India. The company offers information and information enabled services; and turnkey consultancy services to customers in their business domain. It also provides services related to Web and E-commerce development, real time application development, business intelligence analytics, CRM development, digital marketing, UI and UX design, and automation testing and quality assurance. Sigma Solve Limited was incorporated in 2010 and is based in Ahmedabad, India.

India

Sigma Solve Limited

Technology

The company pays dividends on rare occasions. There have only been a few years with dividend payments in the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. 

SIGMA.NS reported revenue of INR 762mn in the last 12 months, up 11% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 9% from FY24 to INR 18.57.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 6ppts and its growth accelerated by 2ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is favourable. This generally signifies that a stock is fairly valued or marginally undervalued abd is becoming more 'expensive', suggesting a short-term spike in confidence by the market at large.

The company has reported strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 34.8% in the last 12 months, up from 33.5% in FY24. 

Historically, SIGMA.NS has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 25.1%, down from 25.5% in FY24. 

In the last 12 months, the return on capital employed (RoCE) declined to 34.5%, above the peers. 

Sigma Solve Limited reported a return on equity (RoE) of 38.6% in the last 12 months, down from 44.2% in FY24. 

Another important profitability metric, return on assets (RoA), amounted to 31.0% in the last 12 months, a decrease from 34.6% in FY24. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 10.5 in the past several years. This ratio implies a excellent shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

SIGMA.NS has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is relatively stable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note robust profitability, solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, excessive margin volatility, and poor working capital management.

In highly turbulent market conditions, SIGMA.NS is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, SIGMA.NS is highly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change somewhat erratically. The stock's losses on its worst days (less than 1-5% of the time) will range from moderate to substantial. 

From both historical and forecast perspectives, the stock is fairly priced compared to similar stocks. In particular, the stock is reasonably priced on P/E, of fair value on EV/EBITD. 

Sigma Solve Limited

₹ 378.1

3

Sigma Solve Limited

₹ 378.1

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

₹ 378.1

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