Dolphin Offshore Enterprises (India) Limited's (NSE:DOLPHIN) Stock's On An Uptrend: Are Strong Financials Guiding The Market?
Most readers would already be aware that Dolphin Offshore Enterprises (India)'s (NSE:DOLPHIN) stock increased significantly by 16% over the past week. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Specifically, we decided to study Dolphin Offshore Enterprises (India)'s ROE in this article.
Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Put another way, it reveals the company's success at turning shareholder investments into profits.
How To Calculate Return On Equity?
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Dolphin Offshore Enterprises (India) is:
18% = ₹529m ÷ ₹3.0b (Based on the trailing twelve months to September 2025).
The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each ₹1 of shareholders' capital it has, the company made ₹0.18 in profit.
View our latest analysis for Dolphin Offshore Enterprises (India)
What Has ROE Got To Do With Earnings Growth?
Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.
Dolphin Offshore Enterprises (India)'s Earnings Growth And 18% ROE
To start with, Dolphin Offshore Enterprises (India)'s ROE looks acceptable. Especially when compared to the industry average of 8.3% the company's ROE looks pretty impressive. This probably laid the ground for Dolphin Offshore Enterprises (India)'s significant 40% net income growth seen over the past five years. However, there could also be other causes behind this growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.
As a next step, we compared Dolphin Offshore Enterprises (India)'s net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 9.8%.
Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. Is Dolphin Offshore Enterprises (India) fairly valued compared to other companies? These 3 valuation measures might help you decide.
Is Dolphin Offshore Enterprises (India) Efficiently Re-investing Its Profits?
Dolphin Offshore Enterprises (India) doesn't pay any regular dividends to its shareholders, meaning that the company has been reinvesting all of its profits into the business. This is likely what's driving the high earnings growth number discussed above.
Summary
In total, we are pretty happy with Dolphin Offshore Enterprises (India)'s performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. If the company continues to grow its earnings the way it has, that could have a positive impact on its share price given how earnings per share influence long-term share prices. Remember, the price of a stock is also dependent on the perceived risk. Therefore investors must keep themselves informed about the risks involved before investing in any company. You can see the 3 risks we have identified for Dolphin Offshore Enterprises (India) by visiting our risks dashboard for free on our platform here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.