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SunPower (NASDAQ:SPWR) showed a loss in earnings since Q3, totaling $19.71 million. Sales, on the other hand, increased by 24.38% to $341.81 million during Q4. SunPower collected $274.81 million in revenue during Q3, but reported earnings showed a $3.96 million loss.
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 Q4, SunPower posted an ROCE of 0.05%.
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 SunPower's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.
Q4 Earnings Recap
SunPower reported Q4 earnings per share at $0.14/share, which beat analyst predictions of $0.07/share.
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