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Return On Capital Employed Overview: Peloton Interactive

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Peloton Interactive (NASDAQ: PTON) showed a loss in earnings since Q3, totaling $90.00 million. Sales, on the other hand, increased by 15.73% to $607.10 million during Q4. Peloton Interactive collected $524.60 million in revenue during Q3, but reported earnings showed a $58.40 million loss.

What Is ROCE?

Changes in earnings and sales indicate shifts in Peloton Interactive’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 Q4, Peloton Interactive 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 Peloton Interactive 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 Peloton Interactive, the return on capital employed ratio shows the number of assets can actually help the company achieve higher returns, an important note investors will take into account when gauging the payoff from long-term financing strategies.

Q4 Earnings Recap

Peloton Interactive reported Q4 earnings per share at $0.27/share, which beat analyst predictions of $0.1/share.

 

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Posted-In: Earnings News Tech