Return On Capital Employed Overview: Anaplan

Anaplan PLAN reported Q2 sales of $106.51 million. Earnings fell to a loss of $37.67 million, resulting in a 2.8% decrease from last quarter. Anaplan collected $103.84 million in revenue during Q1, but reported earnings showed a $38.76 million loss.

What Is ROCE?

Changes in earnings and sales indicate shifts in Anaplan’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, Anaplan posted an ROCE of -0.13%.

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 Anaplan 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 Anaplan, 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

Anaplan reported Q2 earnings per share at $-0.04/share, which beat analyst predictions of $-0.12/share.