Market Overview

Looking Into Zoom Video Communications's Return On Capital Employed

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Looking at Q2, Zoom Video Communications (NASDAQ: ZM) earned $188.10 million, a 704.38% increase from the preceding quarter. Zoom Video Communications also posted a total of $663.52 million in sales, a 102.19% increase since Q1. Zoom Video Communications earned $23.39 million, and sales totaled $328.17 million in Q1.

What Is ROCE?

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, Zoom Video Communications posted an ROCE of 0.16%.

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

Q2 Earnings Insight

Zoom Video Communications reported Q2 earnings per share at $0.92/share, which beat analyst predictions of $0.45/share.

 

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