Looking into Shake Shack's Return on Capital Employed

After pulling data from Benzinga Pro it seems like during Q2, Shake Shack SHAK earned $3.67 million, a 137.97% increase from the preceding quarter. Shake Shack also posted a total of $187.46 million in sales, a 20.72% increase since Q1. Shake Shack collected $155.28 million in revenue during Q1, but reported earnings showed a $9.65 million loss.

What Is ROCE?

Changes in earnings and sales indicate shifts in Shake Shack'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 Q2, Shake Shack posted an ROCE of 0.01%.

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.

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.

For Shake Shack, the return on capital employed ratio shows the number of assets can actually help the company achieve higher returns, an important note investors will take into account when gauging the payoff from long-term financing strategies.

Analyst Predictions

Shake Shack reported Q2 earnings per share at $0.05/share, which beat analyst predictions of $-0.08/share.