Shree OSFM E-Mobility (NSE:SHREEOSFM) Is Doing The Right Things To Multiply Its Share Price
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Shree OSFM E-Mobility's (NSE:SHREEOSFM) returns on capital, so let's have a look.
Understanding Return On Capital Employed (ROCE)
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Shree OSFM E-Mobility, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.13 = ₹124m ÷ (₹1.2b - ₹267m) (Based on the trailing twelve months to September 2025).
Thus, Shree OSFM E-Mobility has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 14% generated by the Transportation industry.
See our latest analysis for Shree OSFM E-Mobility
Historical performance is a great place to start when researching a stock so above you can see the gauge for Shree OSFM E-Mobility's ROCE against it's prior returns. If you'd like to look at how Shree OSFM E-Mobility has performed in the past in other metrics, you can view this free graph of Shree OSFM E-Mobility's past earnings, revenue and cash flow.
What Can We Tell From Shree OSFM E-Mobility's ROCE Trend?
Investors would be pleased with what's happening at Shree OSFM E-Mobility. The data shows that returns on capital have increased substantially over the last four years to 13%. Basically the business is earning more per dollar of capital invested and in addition to that, 412% more capital is being employed now too. So we're very much inspired by what we're seeing at Shree OSFM E-Mobility thanks to its ability to profitably reinvest capital.
On a related note, the company's ratio of current liabilities to total assets has decreased to 22%, which basically reduces it's funding from the likes of short-term creditors or suppliers. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.
What We Can Learn From Shree OSFM E-Mobility's ROCE
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Shree OSFM E-Mobility has. And since the stock has fallen 34% over the last year, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
One more thing, we've spotted 2 warning signs facing Shree OSFM E-Mobility that you might find interesting.
While Shree OSFM E-Mobility may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.