Market Overview

Return On Capital Employed Overview: Penn National Gaming

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During Q2, Penn National Gaming (NASDAQ: PENN) brought in sales totaling $305.50 million. However, earnings decreased 70.5%, resulting in a loss of $165.40 million. In Q1, Penn National Gaming brought in $1.12 billion in sales but lost $560.60 million in earnings.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Penn National Gaming’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, Penn National Gaming posted an ROCE of -0.11%.

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 Penn National Gaming 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 Penn National Gaming, 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 Recap

Penn National Gaming reported Q2 earnings per share at $-1.69/share, which beat analyst predictions of $-2.17/share.

 

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