Is Turtle Beach Corporation (NASDAQ: HEAR) 55% ROCE good?

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Today we are going to take a look at Turtle Beach Corporation (NASDAQ: LISTEN) check whether this could be an attractive investment perspective. In particular, we look at the return on capital employed (ROCE) because it can be used to derive how profitably the company can use capital in its business. "Data-reactid =" 27 "> Today we're going to take a look at Turtle Beach Corporation (NASDAQ: HEAR) to see if it is an attractive investment prospect to capitalize on its business.

First, we'll look at what ROCE is and how we calculate it. Then we compare the ROCE with similar companies. Finally, let's take a look at how current liabilities affect ROCE.

Return on capital employed (ROCE): what is it?

<p class = "canvas-atom-canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "ROCE measures the amount of the pre-tax profit a company can from the capital invested in their business. Generally, a higher ROCE is better. In short, it's a useful tool, but it's not without its drawbacks. Author Edwin Whiting says Be careful when comparing the ROCE of different companies, because "No two companies are alike." Data-reactid = "30"> ROCE measures the amount of the pre-tax profit that a company can achieve from the capital invested in its company. In general, a higher ROCE is better. In short, it's a useful tool, but it's not without drawbacks. Author Edwin Whiting says that when comparing the ROCE of different companies, he should be careful because “no company is exactly the same.

How do we calculate the ROCE?

Analysts use this formula to calculate the return on capital employed:

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Return on investment = earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)"data-reactid =" 33 ">Return on investment = earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)

Or for Turtle Beach:

0.55 = US $ 25 million (US $ 131 million – US $ 85m) (based on the past twelve months to September 2019)

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "So, Turtle Beach has a ROCE of 55%. "data-reactid =" 36 "> So, Turtle Beach has a ROCE of 55%.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = " Check out our latest analysis for Turtle Beach "data-reactid =" 37 "> Check out our latest analysis for Turtle Beach

Does Turtle Beach have a good ROCE?

When comparing similar companies, investors may find the ROCE useful. In our analysis, Turtle Beach ROCE's importance is higher than the 11% average in the Durable Consumer Goods industry. I think that's good to see as it implies that the company is better than other companies at getting the most out of their capital. Aside from comparing to its industry for a moment, Turtle Beach ROCE in absolute terms currently looks quite high.

Turtle Beach has a ROCE of 55%, but it doesn't have a ROCE 3 years ago since it was unprofitable. This means that the business has improved. You can see how Turtle Beach ROCE compares to its industry below. Click here to learn more about past growth.

NasdaqGM: HEAR Past Revenue and Net Income, January 5, 2020

<p class = "canvas-atom canvas-text MB (1.0em) MB (0) – SM MB (0.8em) – SM" type = "text" content = "If you consider this metric, consider this ROCE can for Cyclical companies can be deceptive, as yields can be unbelievable in booming times and terribly low in downturns. After all, ROCE is just a snapshot of a single year that matters and you can see analyst predictions on our website free Company analyst forecast report, "data-reactid =" 53 "> When considering this metric, keep in mind that it is backward-looking and not necessarily predictable. ROCE can be deceptive to cyclical companies because returns are incredible in booming times and incredible in times of extremely low returns Slumps can look like ROCE is only a snapshot of a year after all. Future development is what matters and you can see analysts' forecasts in ours free Company analyst forecast report.

Are Turtle Beach's current liabilities distorting ROCE?

Short-term (or short-term) liabilities are things like supplier bills, overdrafts or tax bills that must be paid within 12 months. The ROCE equation subtracts short-term debt from capital employed, so a company with many short-term liabilities appears to have less capital invested and a higher ROCE than usual. To counteract this, investors can check whether a company has high short-term liabilities in relation to total assets.

Turtle Beach has total assets of $ 131 million and short-term liabilities of $ 85 million. Therefore, his short-term liabilities correspond to approximately 65% ​​of his total assets. Turtle Beach's high level of short-term debt increases the ROCE – but its ROCE is still impressive.

The bottom line on Turtle Beachs ROCE

<p class = "Canvas-Atom-Canvas-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "In my book this business could be worthy of further research. Turtle Beach is shaping up well under this analysis, But it is far from the only company that delivers excellent numbers , You may also want to check this free Collection of companies with excellent profit growth."Data-reactid =" 58 "> In my book, this business could be worthy of further research. Turtle Beach is shaping well in the context of this analysis But it is far from the only company that delivers excellent numbers , You may also want to check this free Collection of companies with excellent profit growth.

<p class = "Canvas Atom Canvas Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Turtle Beach is not the only inventory that insiders offer For those who like to find something profitable investments This free List of growing companies with recent insider purchases might be just the thing."Data-reactid =" 63 "> Turtle Beach is not the only camp that insiders are buying. For those who like to find profitable investments This free List of growing companies with recent insider purchases might be just the thing.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "If you discover an error that justifies a correction, please contact the editorial team at editorial-team@simplywallst.com, This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Simply Wall St has no position in the stocks mentioned.

We strive to provide you with long-term, focused research analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Thank you for reading."data-reactid =" 64 ">If you discover an error that justifies a correction, please contact the editorial team at editorial-team@simplywallst.com. This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Simply Wall St has no position in the stocks mentioned.

We strive to provide you with long-term, focused research analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Thank you for reading.