Market Overview

Return On Capital Employed Overview: PayPal Holdings

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Looking at Q2, PayPal Holdings (NASDAQ: PYPL) earned $951.00 million, a 138.94% increase from the preceding quarter. PayPal Holdings also posted a total of $5.26 billion in sales, a 13.92% increase since Q1. PayPal Holdings earned $398.00 million, and sales totaled $4.62 billion in Q1.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in PayPal Holdings’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, PayPal Holdings posted an ROCE of 0.05%.

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 PayPal Holdings 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.

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

Q2 Earnings Recap

PayPal Holdings reported Q2 earnings per share at $1.07/share, which beat analyst predictions of $0.86/share.

 

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Posted-In: Earnings Fintech News