During Q4, Arena Pharmaceuticals's (NASDAQ:ARNA) reported sales totaled $37.00 thousand. Despite a 23.83% in earnings, the company posted a loss of $122.35 million. Arena Pharmaceuticals collected $20.00 thousand in revenue during Q3, but reported earnings showed a $98.80 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 Q4, Arena Pharmaceuticals posted an ROCE of -0.11%.
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.
ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Arena Pharmaceuticals 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 Arena Pharmaceuticals'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
Arena Pharmaceuticals reported Q4 earnings per share at $-2.1/share, which did not meet analyst predictions of $-1.85/share.
See more from Benzinga
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.