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Market Overview

Return On Capital Employed Overview: Alaska Air Group


In Q3, Alaska Air Group (NYSE: ALK) posted sales of $701.00 million. Earnings were up 98.26%, but Alaska Air Group still reported an overall loss of $571.00 million. Alaska Air Group collected $421.00 million in revenue during Q2, but reported earnings showed a $288.00 million loss.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Alaska Air 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, Alaska Air Group posted an ROCE of -0.17%.

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 Alaska Air 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.

For Alaska Air Group, the return on capital employed ratio shows the current amount of assets may not actually be helping the company achieve higher returns, a note many investors will take into account when making long-term financial decisions.

Q3 Earnings Insight

Alaska Air Group reported Q3 earnings per share at $-3.23/share, which did not meet analyst predictions of $-3.01/share.


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