Nagarro SE: Delivering Exceptional ROE in the IT Services Industry

Nagarro SE (ETR:NA9), a digital engineering company based in Munich, Germany, has consistently demonstrated an impressive Return on Equity (ROE) compared to its industry peers. With a ROE of 26.93% as of February 2025, Nagarro SE has outperformed the industry average of 6.63% over the past four quarters. This article explores the key drivers behind Nagarro SE's strong ROE and its sustainability in the long term.

Nagarro SE's high ROE can be attributed to several factors, including:

1. Efficient use of assets: Nagarro SE has a high asset turnover ratio of 1.33, indicating that the company is effectively utilizing its assets to generate revenue. This efficiency in asset utilization contributes to a higher ROE.
2. High gross margin: Nagarro SE maintains a gross margin of 21.23%, which is relatively high compared to its peers. This high gross margin contributes to a higher operating margin and ultimately a higher ROE.
3. Strong operating and profit margins: Nagarro SE's operating margin is 10.32% and profit margin is 5.74%. These strong margins indicate that the company is effectively managing its costs and generating profits, which contributes to a higher ROE.
4. Effective capital allocation: Nagarro SE's return on invested capital (ROIC) is 11.72%, which is higher than its average historical ROIC of 9.71%. This suggests that the company is effectively allocating capital to generate returns, contributing to a higher ROE.
5. Growth in revenue: Nagarro SE has consistently shown growth in revenue, with a 6.51% increase in 2023 compared to the previous year. This growth in revenue contributes to a higher ROE.

These factors are likely to be sustainable in the long term, as they are based on Nagarro SE's efficient operations, strong financial management, and effective capital allocation. However, it is essential to monitor these factors and ensure that Nagarro SE continues to maintain its competitive edge and adapt to changing market conditions. Additionally, it is crucial to consider external factors, such as the macroeconomic environment and industry trends, which may impact Nagarro SE's ROE in the long term.

In conclusion, Nagarro SE's strong ROE is a testament to the company's efficient operations, effective capital allocation, and consistent revenue growth. By focusing on these key drivers, Nagarro SE is well-positioned to maintain its competitive advantage and deliver exceptional returns for its shareholders in the long term. As an investor, keeping an eye on Nagarro SE's ROE and the factors that contribute to it can provide valuable insights into the company's financial health and potential for growth.