To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Dalrymple Bay Infrastructure (ASX:DBI) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on Dalrymple Bay Infrastructure is:

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

0.072 = AU$239m ÷ (AU$3.4b - AU$120m) (Based on the trailing twelve months to December 2024).

Therefore, Dalrymple Bay Infrastructure has an ROCE of 7.2%. In absolute terms, that's a low return, but it's much better than the Infrastructure industry average of 5.8%.

See our latest analysis for Dalrymple Bay Infrastructure

Above you can see how the current ROCE for Dalrymple Bay Infrastructure compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Dalrymple Bay Infrastructure for free.

So How Is Dalrymple Bay Infrastructure's ROCE Trending?

Dalrymple Bay Infrastructure's ROCE growth is quite impressive. The figures show that over the last four years, ROCE has grown 129% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

What We Can Learn From Dalrymple Bay Infrastructure's ROCE

To bring it all together, Dalrymple Bay Infrastructure has done well to increase the returns it's generating from its capital employed. And with the stock having performed exceptionally well over the last three years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Dalrymple Bay Infrastructure can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 2 warning signs for Dalrymple Bay Infrastructure you'll probably want to know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.