Benzinga | Feb 25, 2021 09:18AM EST

Return On Capital Employed Overview: ANGI Homeservices

During Q4, ANGI Homeservices's (NASDAQ:ANGI) reported sales totaled $359.30 million. Despite a 15.24% in earnings, the company posted a loss of $3.48 million. In Q3, ANGI Homeservices brought in $389.91 million in sales but lost $3.02 million in earnings.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in ANGI Homeservices'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 Q4, ANGI Homeservices posted an ROCE of -0.0%.

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 ANGI Homeservices 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 ANGI Homeservices, 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.

Q4 Earnings Recap

ANGI Homeservices reported Q4 earnings per share at $-0.03/share, which did not meet analyst predictions of $-0.02/share.