Overview of Palo Alto Networks Return on Capital Employed

According to Benzinga Pro data, during the third trimester, Palo Alto Networks PANW had a turnover of 1.39 billion dollars. Profits rose 21.71%, but Palo Alto Networks still posted an overall loss of $73.20 million. Palo Alto Networks collected $1.32 billion in revenue during the second quarter, but reported earnings showed a loss of $93.50 million.

What is ROCE?

Return on capital employed is a measure of annual pre-tax profit relative to the capital employed by a business. Changes in profits and sales indicate changes in a company’s ROCE. A higher ROCE is generally indicative of a company’s successful growth and is a sign of higher earnings per share in the future. A low or negative ROCE suggests otherwise. In Q3, Palo Alto Networks posted a ROCE of -0.22%.

Keep in mind that while ROCE is a good measure of a company’s recent performance, it’s not a very reliable indicator of a company’s earnings or sales in the near future.

ROCE is a powerful metric for comparing the efficiency of capital allocation for similar companies. A relatively high ROCE shows that Palo Alto Networks potentially operates 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 ultimately growth in earnings per share ( EPS).

For Palo Alto Networks, a negative ROCE ratio of -0.22% suggests that management may not be allocating capital efficiently. Efficient capital allocation is a positive indicator that a business will achieve more sustainable success and favorable long-term returns; poor capital allocation can hurt a company’s performance over time.

Analyst predictions

Palo Alto Networks reported third-quarter earnings per share of $1.79/share, beating analysts’ forecast of $1.68/share.

This article was generated by Benzinga’s automated content engine and reviewed by an editor.