Benzinga | Jun 15, 2021 11:07AM EDT

Snowflake: Return On Capital Employed Insights

In Q1, Snowflake (NYSE:SNOW) posted sales of $228.91 million. Earnings were up 2.59%, but Snowflake still reported an overall loss of $205.59 million. Snowflake collected $190.47 million in revenue during Q4, but reported earnings showed a $200.40 million loss.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Snowflake'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 Q1, Snowflake posted an ROCE of -0.04%.

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 Snowflake'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.

Q1 Earnings Insight

Snowflake reported Q1 earnings per share at $-0.12/share, which beat analyst predictions of $-0.16/share.