Looking Into Adtalem Global Education's Return On Capital Employed

Pulled from Benzinga Pro data, Adtalem Global Education ATGE posted Q3 earnings of $349.84 million, an increase from Q2 of 1859.57%. Sales dropped to $365.62 million, a 1.5% decrease between quarters. In Q2, Adtalem Global Education brought in $371.20 million in sales but only earned $17.85 million.

Why Is ROCE 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 Q3, Adtalem Global Education posted an ROCE of 0.23%.

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 a powerful metric for comparing the effectiveness of capital allocation for similar companies. A relatively high ROCE shows Adtalem Global Education 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, ultimately, earnings per share (EPS) growth.

For Adtalem Global Education, the positive return on capital employed ratio of 0.23% suggests that management is allocating their capital effectively. Effective capital allocation is a positive indicator that a company will achieve more durable success and favorable long-term returns.