Benzinga | Aug 16, 2021 10:43AM EDT

Return on Capital Employed Overview: Arista Networks

After pulling data from Benzinga Pro it seems like during Q2, Arista Networks (NYSE:ANET) earned $219.37 million, a 6.34% increase from the preceding quarter. Arista Networks also posted a total of $707.32 million in sales, a 5.96% increase since Q1. In Q1, Arista Networks earned $206.29 million, and total sales reached $667.56 million.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Arista Networks'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 Q2, Arista Networks posted an ROCE of 0.06%.

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.

For Arista Networks, the return on capital employed ratio shows the number of assets can actually help the company achieve higher returns, an important note investors will take into account when gauging the payoff from long-term financing strategies.

Analyst Predictions

Arista Networks reported Q2 earnings per share at $2.72/share, which beat analyst predictions of $2.54/share.