If you're looking at a mature business that's past the growth phase, what are some of the underlying trends that pop up? When we see a declining return on capital employed (ROCE) in conjunction with a declining base of capital employed, that's often how a mature business shows signs of aging. This indicates to us that the business is not only shrinking the size of its net assets, but its returns are falling as well. On that note, looking into Restore (LON:RST), we weren't too upbeat about how things were going.

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. Analysts use this formula to calculate it for Restore:

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

0.062 = UK£30m ÷ (UK£556m - UK£72m) (Based on the trailing twelve months to June 2024).

Thus, Restore has an ROCE of 6.2%. Ultimately, that's a low return and it under-performs the Commercial Services industry average of 8.9%.

See our latest analysis for Restore

Above you can see how the current ROCE for Restore 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 Restore for free.

We are a bit worried about the trend of returns on capital at Restore. To be more specific, the ROCE was 8.1% five years ago, but since then it has dropped noticeably. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Restore becoming one if things continue as they have.

In summary, it's unfortunate that Restore is generating lower returns from the same amount of capital. Investors haven't taken kindly to these developments, since the stock has declined 38% from where it was five years ago. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.