Market Overview

ROCE Insights For Lululemon Athletica

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Looking at Q2, Lululemon Athletica (NASDAQ: LULU) earned $135.87 million, a 314.87% increase from the preceding quarter. Lululemon Athletica also posted a total of $902.94 million in sales, a 38.5% increase since Q1. Lululemon Athletica earned $32.75 million, and sales totaled $651.96 million in Q1.

Why ROCE Is Significant

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, Lululemon Athletica posted an ROCE of 0.07%.

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 Lululemon Athletica's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q2 Earnings Insight

Lululemon Athletica reported Q2 earnings per share at $0.74/share, which beat analyst predictions of $0.55/share.

 

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Posted-In: Earnings News