Digimarc Earnings Perspective: Return On Capital Employed - Digimarc (NASDAQ:DMRC)
Digimarc DMRC brought in sales totaling $7.82 million during Q3 according to data provided by Benzinga Pro. However, earnings decreased 1.99%, resulting in a loss of $14.93 million. In Q2, Digimarc brought in $7.75 million in sales but lost $14.64 million in earnings.
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, Digimarc posted an ROCE of -0.15%.
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 Digimarc 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.
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