Investors Met With Slowing Returns on Capital At Dalrymple Bay Infrastructure (ASX:DBI)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Dalrymple Bay Infrastructure (ASX:DBI), it didn't seem to tick all of these boxes.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Dalrymple Bay Infrastructure, this is the formula:

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

0.076 = AU$246m ÷ (AU$3.4b - AU$134m) (Based on the trailing twelve months to June 2025).

So, Dalrymple Bay Infrastructure has an ROCE of 7.6%. In absolute terms, that's a low return, but it's much better than the Infrastructure industry average of 4.0%.

View our latest analysis for Dalrymple Bay Infrastructure

In the above chart we have measured Dalrymple Bay Infrastructure's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Dalrymple Bay Infrastructure for free.

The Trend Of ROCE

There are better returns on capital out there than what we're seeing at Dalrymple Bay Infrastructure. Over the past five years, ROCE has remained relatively flat at around 7.6% and the business has deployed 30% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 4.0% of total assets, is good to see from a business owner's perspective. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

The Bottom Line On Dalrymple Bay Infrastructure's ROCE

In conclusion, Dalrymple Bay Infrastructure has been investing more capital into the business, but returns on that capital haven't increased. Yet to long term shareholders the stock has gifted them an incredible 152% return in the last three years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you'd like to know about the risks facing Dalrymple Bay Infrastructure, we've discovered 2 warning signs that you should be aware of.

While Dalrymple Bay Infrastructure 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.