Benzinga | Apr 23, 2021 09:51AM EDT

Looking Into Norwegian Cruise Line's Return On Capital Employed

During Q4, Norwegian Cruise Line's (NYSE:NCLH) reported sales totaled $9.58 million. Despite a 5.62% in earnings, the company posted a loss of $546.88 million. Norwegian Cruise Line collected $6.52 million in revenue during Q3, but reported earnings showed a $517.78 million loss.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Norwegian Cruise Line'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, Norwegian Cruise Line posted an ROCE of -0.13%.

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.

In Norwegian Cruise Line'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.

Q4 Earnings Insight

Norwegian Cruise Line reported Q4 earnings per share at $-2.33/share, which did not meet analyst predictions of $-2.17/share.