Sun Power SPWR achieved sales totaling $350.28 million during the first quarter according to data provided by Benzinga Pro. However, profits decreased by 235.56% resulting in a loss of $28.46 million. SunPower earned $20.99 million and sales totaled $384.53 million in the fourth quarter.
Why is ROCE important?
Profit data without context is unclear and can be difficult to base trading decisions on. Return on Capital Employed (ROCE) helps filter out the signal from the noise by measuring annual pre-tax profit against the capital employed by a company. Generally, a higher ROCE suggests successful growth of a business and is a sign of higher earnings per share in the future. In the 1st quarter, SunPower posted a ROCE of -0.08%.
It is important to keep in mind that ROCE assesses past performance and is not used as a predictive tool. It’s a good measure of a company’s recent performance, but it doesn’t take into account factors that may affect profits and sales in the near future.
ROCE is a powerful metric for comparing the efficiency of capital allocation for similar companies. A relatively high ROCE shows that SunPower is potentially operating at a higher level of efficiency than other companies in its industry. If the company is generating high profits with its current level of capital, some of that money can be reinvested in more capital, which will generally lead to higher returns and ultimately growth in earnings per share ( EPS).
For SunPower, a negative ROCE ratio of -0.08% suggests management may not be allocating capital efficiently. Efficient capital allocation is a positive indicator that a business will achieve more sustainable success and favorable long-term returns; poor capital allocation can hurt a company’s performance over time.
SunPower reported first-quarter earnings per share of $0.02/share, missing analysts’ forecast of $0.02/share.
This article was generated by Benzinga’s automated content engine and reviewed by an editor.