Looking Into Seattle Genetics's Return On Capital Employed

Seattle Genetics SGEN reported Q2 sales of $278.00 million. Earnings fell to a loss of $93.97 million, resulting in a 16.37% decrease from last quarter. Seattle Genetics collected $234.51 million in revenue during Q1, but reported earnings showed a $112.36 million loss.

What Is ROCE?

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 Q2, Seattle Genetics posted an ROCE of -0.05%.

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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Seattle Genetics 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 Seattle Genetics's case, the ROCE ratio shows the amount of assets may not be helping the company achieve higher returns. Investors may take this into account before making any long-term financial decisions.

Q2 Earnings Recap

Seattle Genetics reported Q2 earnings per share at $-0.12/share, which beat analyst predictions of $-0.63/share.