Benzinga | Aug 18, 2020 10:36AM EDT

Return On Capital Employed Overview: Clovis Oncology

During Q2, Clovis Oncology's (NASDAQ:CLVS) reported sales totaled $39.89 million. Despite a 0.78% in earnings, the company posted a loss of $82.65 million. Clovis Oncology collected $42.56 million in revenue during Q1, but reported earnings showed a $82.01 million loss.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Clovis Oncology'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, Clovis Oncology posted an ROCE of 0.85%.

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

Q2 Earnings Insight

Clovis Oncology reported Q2 earnings per share at $-1.11/share, which did not meet analyst predictions of $-1.04/share.