Benzinga | Feb 3, 2021 09:36AM EST

Looking Into Gogo's Return On Capital Employed

Looking at Q3, Gogo (NASDAQ:GOGO) earned $22.22 million, a 140.82% increase from the preceding quarter. Gogo's sales decreased to $66.53 million, a 31.16% change since Q2. Gogo collected $96.64 million in revenue during Q2, but reported earnings showed a $54.43 million loss.

What Is ROCE?

Changes in earnings and sales indicate shifts in Gogo'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, Gogo posted an ROCE of -0.03%.

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.

Return on Capital Employed is an important measurement of efficiency and a useful tool when comparing companies that operate in the same industry. A relatively high ROCE indicates a company may be generating profits that can be reinvested into more capital, leading to higher returns and growing EPS for shareholders.

For Gogo, 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

Gogo reported Q3 earnings per share at $-0.11/share, which beat analyst predictions of $-0.77/share.