Benzinga | Jul 6, 2021 01:52PM EDT

Looking Into Bed Bath & Beyond's Return On Capital Employed

Bed Bath & Beyond (NASDAQ:BBBY) reported Q1 sales of $1.95 billion. Earnings fell to a loss of $67.88 million, resulting in a 228.01% decrease from last quarter. Bed Bath & Beyond earned $53.03 million, and sales totaled $2.62 billion in Q4.

What Is ROCE?

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 Q1, Bed Bath & Beyond posted an ROCE of -0.06%.

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.

For Bed Bath & Beyond, the return on capital employed ratio shows the current amount of assets may not actually be helping the company achieve higher returns, a note many investors will take into account when making long-term financial decisions.

Q1 Earnings Insight

Bed Bath & Beyond reported Q1 earnings per share at $0.05/share, which did not meet analyst predictions of $0.08/share.