During Q2, AMC Entertainment Hldgs (NYSE: AMC) brought in sales totaling $18.90 million. However, earnings decreased 76.25%, resulting in a loss of $471.60 million. AMC Entertainment Hldgs collected $941.50 million in revenue during Q1, but reported earnings showed a $1.99 billion loss.

Why ROCE Is Significant

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed in a business. Changes in earnings and sales indicate shifts in a company’s ROCE. A higher ROCE is generally representative of successful growth in a company and is a sign of higher earnings per share for shareholders in the future. A low or negative ROCE suggests the opposite. In Q2, AMC Entertainment Hldgs posted an ROCE of 0.3%.

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.

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.

In AMC Entertainment Hldgs’s case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q2 Earnings Insight

AMC Entertainment Hldgs reported Q2 earnings per share at $-5.44/share, which did not meet analyst predictions of $-4.18/share.