Market Overview

Looking Into American Airlines Group's Return On Capital Employed

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In Q3, American Airlines Group (NASDAQ: AAL) posted sales of $3.17 billion. Earnings were up 15.49%, but American Airlines Group still reported an overall loss of $2.87 billion. In Q2, American Airlines Group brought in $1.62 billion in sales but lost $2.49 billion in earnings.

Why ROCE Is Significant

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 by a business. Generally, a higher ROCE suggests successful growth of a company and is a sign of higher earnings per share in the future. In Q3, American Airlines Group posted an ROCE of 0.52%.

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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows American Airlines Group 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 American Airlines Group's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q3 Earnings Insight

American Airlines Group reported Q3 earnings per share at $-5.54/share, which beat analyst predictions of $-5.88/share.

 

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