Shriram Pistons & Rings (NSE:SHRIPISTON) Is Investing Its Capital With Increasing Efficiency

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. And in light of that, the trends we're seeing at Shriram Pistons & Rings' (NSE:SHRIPISTON) look very promising so lets take a look.

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Understanding 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. Analysts use this formula to calculate it for Shriram Pistons & Rings:

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

0.23 = ₹6.3b ÷ (₹37b - ₹9.2b) (Based on the trailing twelve months to June 2025).

Therefore, Shriram Pistons & Rings has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Auto Components industry average of 13%.

View our latest analysis for Shriram Pistons & Rings

Above you can see how the current ROCE for Shriram Pistons & Rings compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Shriram Pistons & Rings .

The Trend Of ROCE

The fact that Shriram Pistons & Rings is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 23% on its capital. Not only that, but the company is utilizing 136% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line On Shriram Pistons & Rings' ROCE

Long story short, we're delighted to see that Shriram Pistons & Rings' reinvestment activities have paid off and the company is now profitable. And a remarkable 873% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a final note, we've found 1 warning sign for Shriram Pistons & Rings that we think you should be aware of.

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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.