Elastic (NYSE:ESTC) had sales of $177.61 million in the fourth quarter. Despite an increase in earnings of 7.59 percent, Elastic nevertheless lost $37.08 million. Elastic made $157.12 million in revenue in the third quarter, but recorded a $34.46 million loss.
What is the definition of Return On Capital Employed (ROCE)?
Return on Capital Employed (ROCE) is a metric that compares a company’s annual pre-tax profit to the capital it has invested. Earnings and sales fluctuations imply changes in a company’s ROCE. A higher ROCE is indicative of a company’s successful growth and, as a result, of better earnings per share in the future. A low or negative ROCE indicates the inverse. Elastic had a -0.08% ROCE in the fourth quarter.
Keep in mind that, while ROCE is a solid indicator of a company’s previous performance, it isn’t a very good prediction of earnings or sales in the near future.
The Return on Capital Employed (ROCE) is an important indicator for comparing similar businesses. Elastic is potentially functioning at a higher degree of efficiency than other companies in its industry, as seen by its comparatively high ROCE. If the company is making a lot of money with its current capital, some of it can be reinvested in greater capital, resulting in stronger returns and higher earnings per share growth.
In Elastic’s instance, the ROCE ratio indicates that the company’s assets may not be assisting it in achieving higher returns. Before making any long-term financial decisions, investors should consider this.
Insights into Q4 Earnings
Elastic reported $-0.08 earnings per share in the fourth quarter, above consensus expectations of $-0.16./n
