Benzinga | Aug 10, 2021 10:53AM EDT

Looking into WW International's Return on Capital Employed

Pulled from Benzinga Pro data WW International (NASDAQ:WW) posted a 94.06% decrease in earnings from Q4. Sales, however, increased by 2.59% over the previous quarter to $331.80 million. Despite the increase in sales this quarter, the decrease in earnings may suggest WW International is not utilizing their capital as effectively as possible. In Q4, WW International earned $47.67 million and total sales reached $323.43 million.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in WW International'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, WW International posted an ROCE of -0.01%.

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 WW International 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 WW International'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.

Upcoming Earnings Estimate

WW International reported Q1 earnings per share at $-0.2/share, which beat analyst predictions of $-0.24/share.