Benzinga | Jun 23, 2021 10:48AM EDT

Biohaven Pharmaceutical: Return On Capital Employed Insights

During Q1, Biohaven Pharmaceutical's (NYSE:BHVN) reported sales totaled $43.82 million. Despite a 28.93% in earnings, the company posted a loss of $235.88 million. In Q4, Biohaven Pharmaceutical brought in $35.11 million in sales but lost $182.95 million in earnings.

What Is ROCE?

Changes in earnings and sales indicate shifts in Biohaven Pharmaceutical'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, Biohaven Pharmaceutical posted an ROCE of 2.46%.

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 Biohaven Pharmaceutical 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 Biohaven Pharmaceutical's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q1 Earnings Insight

Biohaven Pharmaceutical reported Q1 earnings per share at $-2.97/share, which did not meet analyst predictions of $-2.82/share.