Benzinga | Aug 21, 2020 10:55AM EDT

Looking Into Avinger's Return On Capital Employed

During Q2, Avinger (NASDAQ:AVGR) brought in sales totaling $1.50 million. However, earnings decreased 34.44%, resulting in a loss of $3.59 million. In Q1, Avinger brought in $2.26 million in sales but lost $5.48 million in earnings.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Avinger's Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed in a business. Generally, a higher ROCE suggests successful growth in a company and is a sign of higher earnings per share for shareholders in the future. In Q2, Avinger posted an ROCE of -0.48%.

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 Avinger 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 lead to higher returns and earnings per share growth.

In Avinger's case, the ROCE ratio shows the amount of assets may not be helping the company achieve higher returns. Investors may take this into account before making any long-term financial decisions.

Q2 Earnings Insight

Avinger reported Q2 earnings per share at $-0.18/share, which beat analyst predictions of $-0.2/share.