The Returns At Hariom Pipe Industries (NSE:HARIOMPIPE) Aren't Growing

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. So, when we ran our eye over Hariom Pipe Industries' (NSE:HARIOMPIPE) trend of ROCE, we liked what we saw.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Hariom Pipe Industries is:

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

0.18 = ₹1.0b ÷ (₹8.8b - ₹2.9b) (Based on the trailing twelve months to March 2024).

So, Hariom Pipe Industries has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 14% generated by the Metals and Mining industry.

View our latest analysis for Hariom Pipe Industries

Historical performance is a great place to start when researching a stock so above you can see the gauge for Hariom Pipe Industries' ROCE against it's prior returns. If you'd like to look at how Hariom Pipe Industries has performed in the past in other metrics, you can view this free graph of Hariom Pipe Industries' past earnings, revenue and cash flow.

What Does the ROCE Trend For Hariom Pipe Industries Tell Us?

While the current returns on capital are decent, they haven't changed much. The company has employed 763% more capital in the last five years, and the returns on that capital have remained stable at 18%. Since 18% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Hariom Pipe Industries' ROCE

To sum it up, Hariom Pipe Industries has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 14% to shareholders over the last year. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

One more thing: We've identified 4 warning signs with Hariom Pipe Industries (at least 2 which don't sit too well with us) , and understanding them would certainly be useful.

While Hariom Pipe Industries isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com