Dolphin Offshore Enterprises (India) (NSE:DOLPHIN) Might Have The Makings Of A Multi-Bagger

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. So on that note, Dolphin Offshore Enterprises (India) (NSE:DOLPHIN) looks quite promising in regards to its trends of return on capital.

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 Dolphin Offshore Enterprises (India), this is the formula:

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

0.12 = ₹291m ÷ (₹3.6b - ₹1.2b) (Based on the trailing twelve months to December 2024).

Thus, Dolphin Offshore Enterprises (India) has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Energy Services industry average of 10%.

View our latest analysis for Dolphin Offshore Enterprises (India)

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Dolphin Offshore Enterprises (India).

The Trend Of ROCE

We're delighted to see that Dolphin Offshore Enterprises (India) is reaping rewards from its investments and has now broken into profitability. While the business is profitable now, it used to be incurring losses on invested capital five years ago. Additionally, the business is utilizing 37% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. This could potentially mean that the company is selling some of its assets.

Our Take On Dolphin Offshore Enterprises (India)'s ROCE

In a nutshell, we're pleased to see that Dolphin Offshore Enterprises (India) has been able to generate higher returns from less capital. And a remarkable 737% 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.

Dolphin Offshore Enterprises (India) does have some risks though, and we've spotted 1 warning sign for Dolphin Offshore Enterprises (India) that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.