Looking into Smith & Wesson Brands's Return on Capital Employed

After pulling data from Benzinga Pro it seems like during Q4, Smith & Wesson Brands SWBI earned $116.13 million, a 44.48% increase from the preceding quarter. Smith & Wesson Brands also posted a total of $322.95 million in sales, a 25.37% increase since Q3. Smith & Wesson Brands earned $80.38 million, and sales totaled $257.60 million in Q3.

What Is Return On Capital Employed?

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 Q4, Smith & Wesson Brands posted an ROCE of 0.44%.

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.

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

Upcoming Earnings Estimate

Smith & Wesson Brands reported Q4 earnings per share at $1.71/share, which beat analyst predictions of $1.02/share.