Papa John’s International, Inc. (NASDAQ: PZZA) – Return on Invested Capital Overview: Papa John’s International
Taken from Benzinga Pro data Papa John’s International (NASDAQ: PZZA) posted a 4.75% drop in profits from the first quarter. Sales, however, increased 0.64% from the previous quarter to $ 515.01 million. Despite the increase in sales this quarter, the decline in profits may suggest that Papa John’s International is not using its capital as efficiently as possible. Papa John’s International achieved a profit of $ 46.86 million and sales of $ 511.75 million in the first quarter.
What is ROCE?
Return on capital employed is a measure of the annual profit before tax relative to the capital employed by a business. Changes in profits and sales indicate changes in a company’s ROCE. A higher ROCE is usually indicative of successful business growth and is a sign of higher earnings per share in the future. A low or negative ROCE suggests otherwise. In the second quarter, Papa John’s International posted a ROCE of -0.32%.
Keep in mind that while ROCE is a good measure of a company’s recent performance, it is not a very reliable indicator of a company’s profits or sales in the near future.
ROCE is an important measure for comparing similar businesses. A relatively high ROCE shows that Papa John’s International 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 growth in earnings per share.
In the case of Papa John’s International, the ROCE ratio shows that the amount of assets may not help the company achieve higher returns. Investors can take this into account before making any long-term financial decisions.
Estimated future income
Papa John’s International reported second quarter earnings per share of $ 0.93 / share, beating analysts’ expectations of $ 0.7 / share.