Benzinga | Aug 14, 2020 10:30AM EDT

ROCE Insights For Catalyst Pharmaceuticals

Catalyst Pharmaceuticals (NASDAQ:CPRX) posted a 3.91% decrease in earnings from Q1. Sales, however, increased by 1.61% over the previous quarter to $29.61 million. Despite the increase in sales this quarter, the decrease in earnings may suggest Catalyst Pharmaceuticals is not utilizing their capital as effectively as possible. Catalyst Pharmaceuticals reached earnings of $10.70 million and sales of $29.14 million in Q1.

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 in a business. Generally, a higher ROCE suggests successful growth in a company and is a sign of higher earnings per share for shareholders 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.

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 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.