Benzinga | Jun 30, 2021 10:53AM EDT

Capstone Green Energy: Return On Capital Employed Insights

In Q4, Capstone Green Energy (NASDAQ:CGRN) posted sales of $17.86 million. Earnings were up 305.15%, but Capstone Green Energy still reported an overall loss of $8.42 million. Capstone Green Energy collected $20.68 million in revenue during Q3, but reported earnings showed a $2.08 million loss.

What Is ROCE?

Changes in earnings and sales indicate shifts in Capstone Green Energy'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, Capstone Green Energy posted an ROCE of -0.64%.

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 Capstone Green Energy'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

Capstone Green Energy reported Q4 earnings per share at $-0.39/share, which did not meet analyst predictions of $-0.26/share.