Ignoring the stock price of a company, what are the underlying trends that tell us a business is past the growth phase? 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. So after glancing at the trends within Canada Goose Holdings (TSE:GOOS), we weren't too hopeful.
Understanding Return On Capital Employed (ROCE)
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Canada Goose Holdings:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.087 = CA$99m ÷ (CA$1.5b - CA$389m) (Based on the trailing twelve months to June 2025).
Therefore, Canada Goose Holdings has an ROCE of 8.7%. In absolute terms, that's a low return and it also under-performs the Luxury industry average of 12%.
See our latest analysis for Canada Goose Holdings
In the above chart we have measured Canada Goose Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Canada Goose Holdings .
What Does the ROCE Trend For Canada Goose Holdings Tell Us?
In terms of Canada Goose Holdings' historical ROCE movements, the trend doesn't inspire confidence. Unfortunately the returns on capital have diminished from the 15% that they were earning five years ago. 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. If these trends continue, we wouldn't expect Canada Goose Holdings to turn into a multi-bagger.
What We Can Learn From Canada Goose Holdings' ROCE
In summary, it's unfortunate that Canada Goose Holdings is generating lower returns from the same amount of capital. Investors haven't taken kindly to these developments, since the stock has declined 49% from where it was five years ago. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.
One more thing to note, we've identified 1 warning sign with Canada Goose Holdings and understanding it should be part of your investment process.
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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.