A Comparative Financial Analysis of Three Listed Companies

The Value of Comparing Similar Companies

The best way to learn what a ratio means is to compare companies that should look alike. TCS, Infosys and HCLTech are India's three largest IT services companies. They serve global clients in similar industries, hire from the same talent pool and face the same currency and visa conditions. Differences in their numbers therefore say something about the companies themselves.

This case study applies the site's financial-statement framework to all three.

Revenue and Margins

Revenue growth was similar. Margins were not. TCS held its margin almost flat, while Infosys lost about four points and HCLTech about six. HCLTech's mix includes a larger software products and platforms business and more acquired businesses, which carry different cost structures.

Profit and Returns

Despite different margin paths, net profit grew at almost the same rate at all three, around 8% to 9% a year. Infosys and HCLTech grew revenue faster but lost margin, which brought their profit growth down to TCS's level.

Return on capital employed (ROCE) is where the three differ most. TCS earns over 60% on its capital; HCLTech about 30%. Part of the gap is accounting: HCLTech has made more acquisitions, and goodwill and acquired intangibles add to capital employed. Part is business mix. All three earn far more than any reasonable cost of capital.

Cash Conversion

All three turned their reported profit into cash over the six years. HCLTech's ratio is highest partly because amortisation of acquired intangibles reduces reported profit but not cash.

Receivables

TCS's debtor days rose from 67 to 93 over five years, meaning its clients took almost four weeks longer to pay on average. That is still well within normal ranges for IT services, but it is the clearest trend in the table and worth tracking.

Valuation in October 2026

All three traded well below the multiples they commanded for much of the previous five years. The market was paying between 15 and 20 times earnings for businesses with returns on capital of 30% to 60% and steady cash generation, but with profit growth of under 10% a year and open questions about how AI will change demand for IT services.

HCLTech, with the lowest margin and ROCE, carried the highest P/E. That may reflect expectations for its products business, or a view that its margin decline is closer to ending. It is a reminder that P/E reflects expected future growth as much as past quality.

Limits of This Comparison

• Standardised data. Screener's figures follow a common format and may differ from company-reported numbers.
• Acquisitions affect ROCE and margins differently at each company.
• Valuation is a snapshot from one date in a volatile year.

Habits for Comparing Peers

1. Pick genuinely similar companies so differences mean something.
2. Compare margin paths, not just margin levels.
3. Check whether profit growth came from revenue or margins.
4. Compare cash conversion over several years.
5. Read valuation last, against growth and returns.

The Reframe

Three companies in the same industry, growing at the same pace, reached the same profit growth by different routes. Comparison does not tell you which is the better investment. It tells you which questions to ask about each.