What financial metrics can indicate to us that a company is maturing or even in decline? Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. This indicates the company is producing less profit from its investments and its total assets are decreasing. So after glancing at the trends within Jason Marine Group (Catalist:5PF), we weren't too hopeful.

What Is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for Jason Marine Group:

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

0.005 = S$123k ÷ (S$33m - S$8.4m) (Based on the trailing twelve months to March 2023).

Thus, Jason Marine Group has an ROCE of 0.5%. Ultimately, that's a low return and it under-performs the Communications industry average of 6.8%.

See our latest analysis for Jason Marine Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for Jason Marine Group's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Jason Marine Group, check out these free graphs here.

What Does the ROCE Trend For Jason Marine Group Tell Us?

The trend of returns that Jason Marine Group is generating are raising some concerns. To be more specific, today's ROCE was 2.4% five years ago but has since fallen to 0.5%. In addition to that, Jason Marine Group is now employing 47% less capital than it was five years ago. The combination of lower ROCE and less capital employed can indicate that a business is likely to be facing some competitive headwinds or seeing an erosion to its moat. If these underlying trends continue, we wouldn't be too optimistic going forward.

Our Take On Jason Marine Group's ROCE

In summary, it's unfortunate that Jason Marine Group is shrinking its capital base and also generating lower returns. Despite the concerning underlying trends, the stock has actually gained 32% over the last five years, so it might be that the investors are expecting the trends to reverse. Regardless, we don't like the trends as they are and if they persist, we think you might find better investments elsewhere.

Jason Marine Group does come with some risks though, we found 5 warning signs in our investment analysis, and 3 of those are a bit concerning...

While Jason Marine Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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.