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. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Dolby Laboratories (NYSE:DLB) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

What Is 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. To calculate this metric for Dolby Laboratories, this is the formula:

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

0.10 = US$289m ÷ (US$3.2b - US$389m) (Based on the trailing twelve months to June 2025).

Therefore, Dolby Laboratories has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Software industry average of 8.5% it's much better.

Above you can see how the current ROCE for Dolby Laboratories 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 Dolby Laboratories for free.

What Can We Tell From Dolby Laboratories' ROCE Trend?

Over the past five years, Dolby Laboratories' ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Dolby Laboratories to be a multi-bagger going forward.

What We Can Learn From Dolby Laboratories' ROCE

We can conclude that in regards to Dolby Laboratories' returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 21% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you'd like to know about the risks facing Dolby Laboratories, we've discovered 1 warning sign that you should be aware of.

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.