Market Overview

Looking Into Workhorse Group's Return On Capital Employed

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In Q3, Workhorse Group (NASDAQ: WKHS) posted sales of $564.71 thousand. Earnings were up 40.51%, but Workhorse Group still reported an overall loss of $9.82 million. In Q2, Workhorse Group brought in $91.94 thousand in sales but lost $6.99 million in earnings.

What Is Return On Capital Employed?

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 Q3, Workhorse Group posted an ROCE of 0.81%.

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

Q3 Earnings Recap

Workhorse Group reported Q3 earnings per share at $-0.78/share, which did not meet analyst predictions of $-0.1/share.

 

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