Flotek Industries Earnings Perspective: Return On Invested Capital

According to Benzinga Pro data, during Q2, Flotek Industries FTK posted sales of $9.16 million. Earnings were up 8.6%, but Flotek Industries still reported an overall loss of $7.53 million. Flotek Industries collected $11.77 million in revenue during Q1, but reported earnings showed a $8.24 million loss.

Why Is ROIC Significant?

Earnings data without context is not clear and can difficult to base trading decisions on. Return on Invested Capital (ROIC) helps to filter signal from noise by measuring yearly pre-tax profit relative to invested capital by a business. Generally, a higher ROIC suggests successful growth of a company and is a sign of higher earnings per share in the future. In Q2, Flotek Industries posted an ROIC of -19.47%.

It is important to keep in mind that ROIC evaluates past performance and is not used as a predictive tool. It is a good measure of a company's recent performance, but does not account for factors that could affect earnings and sales in the near future.

For Flotek Industries, a negative ROIC ratio of -19.47% 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.