Benzinga | Aug 20, 2021 02:35PM EDT

Looking into Kennedy-Wilson Holdings's Return on Capital Employed

Pulled from Benzinga Pro data Kennedy-Wilson Holdings (NYSE:KW) reported Q2 sales of $108.40 million. Earnings fell to a loss of $26.10 million, resulting in a 21.96% decrease from last quarter. Kennedy-Wilson Holdings collected $99.40 million in revenue during Q1, but reported earnings showed a $21.40 million loss.

What Is ROCE?

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed by a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth of a company and is a sign of higher earnings per share in the future. A low or negative ROCE suggests the opposite. In Q2, Kennedy-Wilson Holdings posted an ROCE of -0.01%.

Keep in mind, while ROCE is a good measure of a company's recent performance, it is not a highly reliable predictor of a company's earnings or 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 Kennedy-Wilson Holdings'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

Kennedy-Wilson Holdings reported Q2 earnings per share at $1.53/share, which beat analyst predictions of $0.32/share.