ROCE Insights For Snap

In Q2, Snap SNAP posted sales of $454.16 million. Earnings were up 8.47%, but Snap still reported an overall loss of $310.61 million. In Q1, Snap brought in $462.48 million in sales but lost $286.36 million in earnings.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Snap’s Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed in a business. Generally, a higher ROCE suggests successful growth in a company and is a sign of higher earnings per share for shareholders in the future. In Q2, Snap posted an ROCE of -0.14%.

It is important to keep in mind ROCE evaluates past performance and is not used as a predictive tool. It is a good measure of a company's recent performance, but several factors could affect earnings and sales in the near future.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Snap 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 lead to higher returns and earnings per share growth.

For Snap, 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.

Q2 Earnings Insight

Snap reported Q2 earnings per share at $-0.09/share, which beat analyst predictions of $-0.1/share.