Market Overview

Return On Capital Employed Overview: Emergent BioSolutions

Share:

Emergent BioSolutions (NYSE: EBS) showed a loss in earnings since Q1, totaling $126.00 million. Sales, on the other hand, increased by 105.04% to $394.70 million during Q2. Emergent BioSolutions collected $192.50 million in revenue during Q1, but reported earnings showed a $11.60 million loss.

Why ROCE Is Significant

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed by a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth of a company and is a sign of higher earnings per share in the future. A low or negative ROCE suggests the opposite. In Q2, Emergent BioSolutions posted an ROCE of 0.11%.

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 Emergent BioSolutions 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 generally lead to higher returns and earnings per share growth.

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

Q2 Earnings Recap

Emergent BioSolutions reported Q2 earnings per share at $1.98/share, which beat analyst predictions of $0.64/share.

 

Related Articles (EBS)

View Comments and Join the Discussion!

Posted-In: Earnings News