Looking Into Accolade's Return On Invested Capital

By Benzinga Insights

According to Benzinga Pro, during Q3, Accolade (NASDAQ:ACCD) earned $22.50 million, a 136.08% increase from the preceding quarter. Accolade also posted a total of $83.45 million in sales, a 13.87% increase since Q2. In Q2, Accolade brought in $73.29 million in sales but lost $62.36 million in earnings.

What Is ROIC?

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 Q3, Accolade posted an ROIC of -7.35%.

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.

Return on Invested Capital is a measure of yearly pre-tax profit relative to capital invested by a business. Changes in earnings and sales indicate shifts in a company's ROIC. A higher ROIC 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 ROIC suggests the opposite. In Q3, Accolade posted an ROIC of -7.35%.

Keep in mind, while ROIC 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.

For Accolade, a negative ROIC ratio of -7.35% 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.

Analyst Predictions

Accolade reported Q3 earnings per share at $-0.52/share, which beat analyst predictions of $-0.74/share.

This article was generated by Benzinga's automated content engine and reviewed by an editor.


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