Are Expleo Solutions Ltd latest results good or bad?

Expleo Solutions Ltd's latest financial results for Q2 FY26 reflect a significant recovery from the previous quarter, with net profit reaching ₹39.76 crore, representing a substantial increase compared to Q1 FY26. Revenue also showed positive momentum, with an 8.88% quarter-on-quarter growth, indicating improved operational performance. The operating margin improved to 16.53%, up from 11.45%, and the profit after tax margin rose to 14.06% from 7.87%, suggesting enhanced efficiency and profitability during the quarter. However, while the quarterly results appear strong, there are underlying concerns regarding the company's long-term operational metrics. Return on equity has declined to 14.79%, below the historical average of 20.88%, indicating diminishing returns on shareholder capital. Similarly, return on capital employed has weakened to 28.39% from a five-year average of 42.13%, raising questions about the efficiency of capital utilization. The company maintains a stable promoter group with a 71.05% shareholding, but institutional participation remains minimal, with foreign institutional investors holding only 0.32% and mutual funds showing no presence. This lack of institutional confidence may reflect concerns about the sustainability of the recent profit growth and operational challenges. In terms of market performance, Expleo Solutions' stock has underperformed relative to the broader market and its sector, declining 25.32% over the past year while the Sensex gained 8.49%. This persistent underperformance across various timeframes suggests that the market may be skeptical about the company's ability to maintain its recent operational improvements. Overall, Expleo Solutions Ltd's latest results indicate a strong quarterly performance, but the company faces challenges regarding capital efficiency and market perception, leading to an adjustment in its evaluation. Investors should be aware of these mixed signals as they consider the company's future prospects.