Looking Into Hims & Hers Health's Return On Invested Capital

According to Benzinga Pro data, during Q2, Hims & Hers Health HIMS posted sales of $60.69 million. Earnings were up 64.04%, but Hims & Hers Health still reported an overall loss of $17.41 million. Hims & Hers Health collected $52.31 million in revenue during Q1, but reported earnings showed a $48.41 million loss.

What Is Return On Invested Capital?

Return on Invested Capital is a measure of yearly pre-tax profit relative to capital invested by a business. Changes in earnings and sales indicate shifts in a company's ROIC. A higher ROIC 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 ROIC suggests the opposite. In Q2, Hims & Hers Health posted an ROIC of -5.94%.

Keep in mind, while ROIC 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.

For Hims & Hers Health, a negative ROIC ratio of -5.94% suggests that management may not be effectively allocating their capital.Effective capital allocation is a positive indicator that a company will achieve more durable success and favorable long-term returns; poor capital allocation can be a leech on the performance of a company over time.