Looking Into Plug Power's Return On Capital Employed

Plug Power PLUG reported Q1 sales of $40.81 million. Earnings lost a total of $37.48 million, resulting in a 27.26% decrease from last quarter. In Q4, Plug Power brought in $91.66 million in sales, but lost $37.48 million in earnings.

What Is Return On Capital Employed?

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, Plug Power posted a ROCE of -0.53%.

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 Plug Power, the return on capital employed ratio shows the current amount of assets may not actually be helping the company achieve higher returns, a note many investors will take into account when making long-term financial decisions.

Upcoming Earnings Estimate

Plug Power reported earnings at a loss of $0.12 per share in Q1. Analyst estimates for Q2 have not yet been announced.