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Looking Into American Airlines Group's Return On Capital Employed

American Airlines Group (NASDAQ:AAL) reported Q4 sales of $4.03 billion. Earnings fell to a loss of $2.52 billion, resulting in a 12.4% decrease from last quarter. American Airlines Group collected $3.17 billion in revenue during Q3, but reported earnings showed a $2.87 billion loss.

What Is ROCE?

Changes in earnings and sales indicate shifts in American Airlines Group’s Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed by a business. Generally, a higher ROCE suggests successful growth of a company and is a sign of higher earnings per share in the future. In Q4, American Airlines Group posted an ROCE of 0.37%.

It is important to keep in mind ROCE evaluates past performance and is not used as a predictive tool. It is a good measure of a company’s recent performance, but several factors could affect earnings and 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.

For American Airlines Group, the return on capital employed ratio shows the number of assets can actually help the company achieve higher returns, an important note investors will take into account when gauging the payoff from long-term financing strategies.

Q4 Earnings Insight

American Airlines Group reported Q4 earnings per share at $-3.86/share, which beat analyst predictions of $-4.11/share.

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