Return On Capital Employed Overview: Akamai Technologies
Looking at Q2, Akamai Technologies (NASDAQ: AKAM) earned $190.26 million, a 16.79% increase from the preceding quarter. Akamai Technologies also posted a total of $794.72 million in sales, a 3.98% increase since Q1. Akamai Technologies earned $162.91 million, and sales totaled $764.30 million in Q1.
Why ROCE Is Significant
Changes in earnings and sales indicate shifts in Akamai Technologies’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 Q2, Akamai Technologies 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.
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 Akamai Technologies's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.
Q2 Earnings Insight
Akamai Technologies reported Q2 earnings per share at $1.38/share, which beat analyst predictions of $1.21/share.
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