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Looking Into Vanda Pharmaceuticals's Return On Capital Employed

Benzinga Real-time News ·  {{timeTz}}

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According to Benzinga Pro, during Q2, Vanda Pharmaceuticals (NASDAQ:VNDA) earned $2.57 million, a 140.03% increase from the preceding quarter. Vanda Pharmaceuticals also posted a total of $64.39 million in sales, a 6.97% increase since Q1. Vanda Pharmaceuticals collected $60.19 million in revenue during Q1, but reported earnings showed a $6.43 million loss.

What Is Return On Capital Employed?

Earnings data without context is not clear and can be difficult to base trading decisions on. Return on Capital Employed (ROCE) helps to filter signal from noise by measuring 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 Q2, Vanda Pharmaceuticals posted an ROCE of 0.01%.

It is important to keep in mind that ROCE 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.

ROCE is a powerful metric for comparing the effectiveness of capital allocation for similar companies. A relatively high ROCE shows Vanda Pharmaceuticals 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.

For Vanda Pharmaceuticals, the positive return on capital employed ratio of 0.01% suggests that management is allocating their capital effectively. Effective capital allocation is a positive indicator that a company will achieve more durable success and favorable long-term returns.

Upcoming Earnings Estimate

Vanda Pharmaceuticals reported Q2 earnings per share at $0.05/share, which did not meet analyst predictions of $0.11/share.

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

This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal.


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