Benzinga | Oct 28, 2020 11:00AM EDT

Looking Into Catalyst Pharmaceuticals's Return On Capital Employed

Catalyst Pharmaceuticals (NASDAQ:CPRX) showed a loss in earnings since Q1, totaling $10.28 million. Sales, on the other hand, increased by 1.61% to $29.61 million during Q2. In Q1, Catalyst Pharmaceuticals earned $10.70 million and total sales reached $29.14 million.

What Is ROCE?

Changes in earnings and sales indicate shifts in Catalyst Pharmaceuticals'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, Catalyst Pharmaceuticals posted an ROCE of 0.09%.

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

Q2 Earnings Recap

Catalyst Pharmaceuticals reported Q2 earnings per share at $0.09/share, which beat analyst predictions of $0.08/share.