Return On Capital Employed Overview: Pure Storage

During Q1, Pure Storage's PSTG reported sales totaled $412.71 million. Despite a 9.09% in earnings, the company posted a loss of $76.16 million. In Q4, Pure Storage brought in $502.72 million in sales but lost $69.81 million in earnings.

What Is Return On Capital Employed?

Changes in earnings and sales indicate shifts in Pure Storage's Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed by a business. Generally, a higher ROCE suggests successful growth of a company and is a sign of higher earnings per share in the future. In Q1, Pure Storage posted an ROCE of -0.11%.

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 Pure Storage 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 generally lead to higher returns and earnings per share growth.

In Pure Storage's case, the ROCE ratio shows the amount of assets may not be helping the company achieve higher returns. Investors may take this into account before making any long-term financial decisions.

Q1 Earnings Insight

Pure Storage reported Q1 earnings per share at $0.0/share, which beat analyst predictions of $-0.06/share.