Market Overview

ROCE Insights For Workhorse Group

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Workhorse Group (NASDAQ: WKHS) posted a 119.28% decrease in earnings from Q4. Sales, however, increased by 3124.94% over the previous quarter to $84,300. Despite the increase in sales this quarter, the decrease in earnings may suggest Workhorse Group is not utilizing its capital as effectively as possible. Workhorse Group collected $2,610 in revenue during Q4, but reported a $4.76 million loss in earnings.

Why ROCE Is Significant

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed in a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth in a company and is a sign of higher earnings per share for shareholders in the future. A low or negative ROCE suggests the opposite.

In Q1, Workhorse Group posted a ROCE of 2.39%.

Keep in mind, while ROCE is a good measure of a company's recent performance, it is not a highly reliable predictor of a company's earnings or sales in the near future.

Return on Capital Employed is an important measurement of efficiency and a useful tool when comparing companies that operate in the same industry. A relatively high ROCE indicates a company may be generating profits that can be reinvested into more capital, leading to higher returns and growing EPS for shareholders.

For Workhorse Group, the return on capital employed ratio shows the number of assets can actually help the company achieve higher returns, an important note investors will take into account when gauging the payoff from long-term financing strategies.

Upcoming Earnings Estimate

Analysts predict earnings per share to decrease to a loss of $0.13 a share in Q1.

 

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