To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. With that in mind, we've noticed some promising trends at Gulf Marine Services (LON:GMS) so let's look a bit deeper.

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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. To calculate this metric for Gulf Marine Services, this is the formula:

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

0.11 = US$63m ÷ (US$670m - US$99m) (Based on the trailing twelve months to June 2025).

So, Gulf Marine Services has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Energy Services industry average of 12%.

See our latest analysis for Gulf Marine Services

Above you can see how the current ROCE for Gulf Marine Services 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 Gulf Marine Services for free.

How Are Returns Trending?

Gulf Marine Services' ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 290% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

Our Take On Gulf Marine Services' ROCE

In summary, we're delighted to see that Gulf Marine Services has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. 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.

One more thing, we've spotted 2 warning signs facing Gulf Marine Services that you might find interesting.

While Gulf Marine Services 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.