Market Overview

Return On Capital Employed Overview: American Airlines Group

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During Q2, American Airlines Group (NASDAQ: AAL) brought in sales totaling $1.62 billion. However, earnings decreased 2.47%, resulting in a loss of $2.49 billion. In Q1, American Airlines Group brought in $8.52 billion in sales but lost $2.55 billion in earnings.

What Is ROCE?

Changes in earnings and sales indicate shifts in American Airlines Group’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, American Airlines Group posted an ROCE of 0.78%.

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.

Return on Capital Employed is an important measurement of efficiency and a useful tool when comparing companies that operate in the same industry. A relatively high ROCE indicates a company may be generating profits that can be reinvested into more capital, leading to higher returns and growing EPS for shareholders.

For American Airlines Group, 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.

Q2 Earnings Insight

American Airlines Group reported Q2 earnings per share at $-7.82/share, which did not meet analyst predictions of $-7.7/share.

 

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