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Looking Into Planet Fitness's Return On Capital Employed

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Benzinga Insights
·2 min read
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Looking at Q4, Planet Fitness (NYSE:PLNT) earned $32.17 million, a 100.55% increase from the preceding quarter. Planet Fitness also posted a total of $133.77 million in sales, a 26.94% increase since Q3. Planet Fitness earned $16.04 million, and sales totaled $105.38 million in Q3.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Planet Fitness'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 Q4, Planet Fitness posted an ROCE of -0.05%.

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.

View more earnings on PLNT

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Planet Fitness 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 Planet Fitness'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.

Q4 Earnings Recap

Planet Fitness reported Q4 earnings per share at $0.17/share, which did not meet analyst predictions of $0.22/share.

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