Benzinga | Aug 20, 2021 02:38PM EDT

Return on Capital Employed Insights for Zillow Group

Pulled from Benzinga Pro data Zillow Group (NASDAQ:Z) showed a loss in earnings since Q1, totaling $61.73 million. Sales, on the other hand, increased by 7.55% to $1.31 billion during Q2. Zillow Group reached earnings of $87.59 million and sales of $1.22 billion in Q1.

Why ROCE Is Significant

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

Analyst Predictions

Zillow Group reported Q2 earnings per share at $0.44/share, which beat analyst predictions of $0.24/share.