Looking Into Arrowhead Pharmaceuticals's Return On Capital Employed

Arrowhead Pharmaceuticals ARWR reported Q3 sales of $27.38 million. Earnings fell to a loss of $15.95 million, resulting in a 28.3% decrease from last quarter. Arrowhead Pharmaceuticals collected $23.53 million in revenue during Q2, but reported earnings showed a $22.24 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 Q3, Arrowhead Pharmaceuticals posted an ROCE of -0.03%.

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.

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.

In Arrowhead Pharmaceuticals'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.

Q3 Earnings Recap

Arrowhead Pharmaceuticals reported Q3 earnings per share at $-0.13/share, which did not meet analyst predictions of $-0.12/share.