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In Q2, Denny's (NASDAQ: DENN) saw a decline in both earnings and sales. Earnings decreased by 52.07% to $11.33 million, and sales dropped by 58.47% to $40.16 million. Denny's reached earnings of $23.64 million and sales of $96.69 million in Q1.
What Is Return On Capital Employed?
Changes in earnings and sales indicate shifts in Denny's’s Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed in a business. Generally, a higher ROCE suggests successful growth in a company and is a sign of higher earnings per share for shareholders in the future. In Q2, Denny's posted an ROCE of 2.04%.
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 Denny's's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.
Denny's reported Q2 earnings per share at $-0.25/share against analyst predictions of $-0.19/share.
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