Market Overview

Return On Capital Employed Overview: Starbucks


Starbucks (NASDAQ: SBUX) reported Q3 sales of $4.22 billion. Earnings fell to a loss of $772.30 million, resulting in a 284.1% decrease from last quarter. Starbucks earned $419.50 million, and sales totaled $6.00 billion in Q2.

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 Q3, Starbucks posted an ROCE of 0.09%.

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.

In Starbucks's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q3 Earnings Recap

Starbucks reported Q3 earnings per share at $-0.46/share, which beat analyst predictions of $-0.59/share.


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Posted-In: Earnings News Restaurants General