Benzinga | Jun 21, 2021 09:42AM EDT

Party City Holdco Insights: Return On Capital Employed

Looking at Q1, Party City Holdco (NYSE:PRTY) earned $3.27 million, a 108.53% increase from the preceding quarter. Party City Holdco's sales decreased to $426.81 million, a 34.15% change since Q4. Party City Holdco collected $648.18 million in revenue during Q4, but reported earnings showed a $38.29 million loss.

What Is ROCE?

Changes in earnings and sales indicate shifts in Party City Holdco'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, Party City Holdco 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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Party City Holdco 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.

In Party City Holdco's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q1 Earnings Recap

Party City Holdco reported Q1 earnings per share at $-0.05/share, which beat analyst predictions of $-0.18/share.