Benzinga | Aug 20, 2021 02:00PM EDT

Looking into Barrett Business Services's Return on Capital Employed

After pulling data from Benzinga Pro it seems like during Q2, Barrett Business Services (NASDAQ:BBSI) earned $20.48 million, a 371.69% increase from the preceding quarter. Barrett Business Services also posted a total of $233.20 million in sales, a 6.76% increase since Q1. Barrett Business Services collected $218.44 million in revenue during Q1, but reported earnings showed a $7.54 million loss.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Barrett Business Services'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, Barrett Business Services posted an ROCE of 0.1%.

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

Upcoming Earnings Estimate

Barrett Business Services reported Q2 earnings per share at $2.24/share, which beat analyst predictions of $1.5/share.