Benzinga | Aug 5, 2020 11:33AM EDT

Looking Into Microvision's Return On Capital Employed

In Q1, Microvision (NASDAQ:MVIS) posted sales of $1.47 million. Earnings were up 64.15%, but Microvision still reported an overall loss of $5.38 million. Microvision collected $4.61 million in revenue during Q4, but reported earnings showed a $3.28 million loss.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Microvision'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 Q1, Microvision posted an ROCE of 0.74%.

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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Microvision 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 lead to higher returns and earnings per share growth.

In Microvision's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q1 Earnings Insight

Microvision reported Q1 earnings per share that matched analyst predictions of $-0.04/share. The company reports Q2 earnings this afternoon.