Benzinga | Jan 22, 2021 10:59AM EST

Looking Into Biocryst Pharmaceuticals's Return On Capital Employed

In Q3, Biocryst Pharmaceuticals (NASDAQ:BCRX) posted sales of $6.10 million. Earnings were up 11.31%, but Biocryst Pharmaceuticals still reported an overall loss of $42.86 million. In Q2, Biocryst Pharmaceuticals brought in $2.87 million in sales but lost $38.51 million in earnings.

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 Q3, Biocryst Pharmaceuticals posted an ROCE of -1.27%.

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 Biocryst Pharmaceuticals 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 Biocryst Pharmaceuticals, 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 Recap

Biocryst Pharmaceuticals reported Q3 earnings per share at $-0.26/share, which did not meet analyst predictions of $-0.25/share.