Looking into Skillz's Return on Capital Employed

After pulling data from Benzinga Pro it seems like during Q2, Skillz's SKLZ reported sales totaled $89.49 million. Despite a 2.87% in earnings, the company posted a loss of $49.99 million. In Q1, Skillz brought in $83.68 million in sales but lost $51.47 million in earnings.

Why ROCE Is Significant

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 Q2, Skillz posted an ROCE of -0.08%.

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.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Skillz 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.

For Skillz, the return on capital employed ratio shows the current amount of assets may not actually be helping the company achieve higher returns, a note many investors will take into account when making long-term financial decisions.

Analyst Predictions

Skillz reported Q2 earnings per share at $-0.21/share, which did not meet analyst predictions of $-0.1/share.