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Looking Into Palo Alto Networks's Return On Capital Employed

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Benzinga Insights
·1 min read
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In Q2, Palo Alto Networks (NYSE:PANW) posted sales of $1.02 billion. Earnings were up 99.55%, but Palo Alto Networks still reported an overall loss of $88.80 million. Palo Alto Networks collected $946.00 million in revenue during Q1, but reported earnings showed a $44.50 million loss.

What Is Return On Capital Employed?

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, Palo Alto Networks posted an ROCE of -0.07%.

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.

View more earnings on PANW

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 Palo Alto Networks'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.

Q2 Earnings Recap

Palo Alto Networks reported Q2 earnings per share at $1.55/share, which beat analyst predictions of $1.43/share.

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