Benzinga | Mar 26, 2021 07:56AM EDT

ROCE Insights For Skechers USA





Skechers USA (NYSE:SKX) posted a 40.66% decrease in earnings from Q3. Sales, however, increased by 1.84% over the previous quarter to $1.32 billion. Despite the increase in sales this quarter, the decrease in earnings may suggest Skechers USA is not utilizing their capital as effectively as possible. In Q3, Skechers USA earned $88.91 million and total sales reached $1.30 billion.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Skechers USA'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, Skechers USA posted an ROCE of 0.02%.

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 Skechers USA, the return on capital employed ratio shows the number of assets can actually help the company achieve higher returns, an important note investors will take into account when gauging the payoff from long-term financing strategies.

Q4 Earnings Recap

Skechers USA reported Q4 earnings per share at $0.24/share, which did not meet analyst predictions of $0.3/share.